'Sunset industry' that became the frame for India's post-reforms growth

Once labelled a "sunset industry", India's steel sector has been transformed by liberalisation, private investment and consolidation into a key driver of the country's growth

It was the steel ministry’s annual report for 1991-92 that captured a change in the mood. “Production of steel is no longer the preserve of the public sector,” it declared — a simple statement that heralded a new era. 

Under the New Industrial Policy unveiled in July 1991, steel became the first core sector to be delicensed. Large-scale steelmaking was no longer reserved for the public sector, and the requirement to obtain licences for capacity expansion was scrapped, subject only to locational restrictions. 

From January 1, 1992, the government dismantled price and distribution controls, freeing large-scale public and private steelmakers from state regulation. 

The reforms went further: They opened the door to foreign capital and lowered import barriers on key inputs and equipment. The result was a fundamental reshaping of an industry, which was once called a sunset industry — from one dominated by public-sector enterprises since Independence to one led by private players, whose investments would fuel its growth over the next three decades. 

The rise of the private-sector 

In 1990-91, just before the sector opened up, the public sector accounted for 46 per cent of the country’s 13.2 million tonnes (mt) steel production, primarily driven by the Steel Authority of India Ltd (SAIL). 

The private sector accounted for more than half of the output, but was fragmented. Tata Steel, then known as the Tata Iron and Steel Company (TISCO), was the sole integrated steel producer in private hands, with saleable steel production of about 1.9 mt. The rest of the private sector’s output came largely from a multitude of secondary producers. 

Cut to 2025-26, the industry profile stands transformed. Public sector companies — SAIL, Rashtriya Ispat Nigam Ltd (RINL) and NMDC Steel — account for just 14.5 per cent of the 161.7 mt finished steel production, according to data from BigMint.

The private sector, led by four integrated steelmakers — the JSW group, Tata Steel, ArcelorMittal Nippon Steel India (AM/NS India) and Jindal Steel — together command about 40 per cent of total output. JSW Steel and Tata Steel are dominant forces, accounting for about three-fourths of that. 

However, reaching this point would have been impossible under the restrictive policies of the pre-liberalisation era.

 

Before the gates opened 

The Monopolies and Restrictive Trade Practices (MRTP) Act of 1969 marked the beginning of a policy regime that viewed corporate scale with suspicion, even as the government set up large integrated steel plants from the mid-1950s to the early 1970s at Bhilai, Durgapur, Rourkela and Bokaro. 

That was just one element of a wider regime of state controls. In his 1975-76 statement to Tata Steel shareholders, compiled in the book From the Chairman’s Desk: A Collection of JRD Tata’s Letter to Shareholders, Chairman JRD Tata reflected, “Mine have been cries in the wilderness except in 1973 when government did grant temporary relief through a substantial price increase,” he wrote. “Over the last thirty years or so, however, the steel industry has consistently been made to charge uneconomically low prices to steel users.” 

Before liberalisation, the Office of the Iron and Steel Controller in Kolkata decided virtually everything — what steelmakers would produce, how much, who they could sell to, and at what price, recalls Sanak Mishra, who headed corporate planning at SAIL in 1998. 

The then Chairman of Tata Sons, Ratan Tata, at the company’s steel plant in Jamshedpur in 1994 | PHOTO: Tata Steel Archives

The new market reality 

The unshackling, however, brought its own challenges. Just as Indian steelmakers were adjusting to a deregulated market, the collapse of the Soviet Union in 1991 unleashed a wave of low-cost steel exports from the newly independent countries that were part of the Commonwealth of Independent States, depressing global steel prices and putting cash flows under strain. 

Amid competitive pricing pressures, a global consultancy major, as part of a wider Tata group mandate in the mid-1990s, reportedly labelled steel a sunset industry and recommended exiting the business. The verdict came at a time when Tata Steel was a 3 mt producer with a workforce of about 80,000. It would also prove to be a turning point for the company. 

The years between 1995 and 2000 marked the renaissance of Tata Steel, says Tata Steel Executive Director and Chief Financial Officer Koushik Chatterjee. “The company leadership, led by J J Irani, charted a multi-pronged strategy focusing on modernisation of facilities, supply chain transformation, focused cost take out programme, rightsizing of manpower, customer centricity and many others.” 

The ambition was to become the world’s lowest cost steel producer, and Tata Steel achieved that goal in 2001, Chatterjee adds. “We also reduced our workforce by about 40,000 as part of that transformation with a very unique social plan that ensured inclusiveness and empathy.” 

From global shocks to new steel players 

The industry’s transformation was, however, punctuated by challenges. The Asian financial crisis of 1997 triggered a global slowdown, depressing steel demand and prices. At the same time, China’s rapid expansion drove up the cost of key raw materials such as iron ore and coking coal, squeezing margins. 

Back home, entrepreneurs were expanding India’s steelmaking capacity. Sajjan Jindal set up JSW Steel (then Jindal Vijayanagar Steel Ltd), Naveen Jindal scaled up Jindal Steel & Power (now Jindal Steel), the Ruias expanded Essar Steel, and brothers Pramod and Vinod Mittal developed Ispat Industries, adding fresh momentum to private-sector steelmaking. 

By 1997-98, the cumulative impact of excess capacity in a weak market had become impossible to ignore. “It had become clear that SAIL’s profitability would decline sharply,” says Sanak Mishra, who was brought to New Delhi in 1998 to lead the public-sector steelmaker’s corporate restructuring. 

McKinsey was hired to help craft the turnaround. “We drew up a comprehensive restructuring plan, which was approved by the government. It focused on cost reduction, production efficiency, marketing and raw material management. Between 1998 and 2001, SAIL reinvented itself, laying the foundation for its recovery,” Mishra said. 

But the downturn spared no one. In the early 2000s, the government introduced a corporate debt restructuring (CDR) mechanism to help indebted steelmakers such as JSW Steel, Essar Steel and Ispat Industries. 

By 2004-05, JSW and Essar emerged stronger and came out of debt restructuring. Ispat Industries was acquired by JSW Steel in 2010. 

Bigger, Bolder, Stronger 

India’s steel sector capex story has evolved in phases, reflecting shifts in demand and policy, says Satnam Singh, Senior Director and Practice Leader, Crisil Intelligence. 

Early investments in the 1990s and 2000s focused on building core capacity and modernising public-sector units, while private players such as JSW and JSPL (now Jindal Steel) established large greenfield plants, he adds. 

The result: India has climbed several rungs in the global steel league table and is now the world’s second-largest steel producer, albeit a distant second to China. In calendar year 2025, India produced 164.9 mt of crude steel, compared with China’s 960.8 mt. The US ranked a distant third with 81.9 mt. 

As the steel sector transitioned from a constrained environment to an unconstrained one, the industry’s mindset shifted from local to global, points out Jayant Acharya, joint managing director and chief executive officer, JSW Steel. “We became globally competitive in terms of cost and efficiency, brought in new technologies and enriched our product capabilities. Today, the steel industry by and large, produces everything that is made and consumed in the rest of the world.” 

Ranjan Dhar, Director & Vice President – Sales and Marketing, AM/NS India, says the credit goes to the Indian steel industry. “In the last two decades, India has taken the lead in terms of top-end grades and applications — be it API (American Petroleum Institute) grades for the oil and gas sector or automobiles.” 

Today, only 10 per cent of steel requirement is imported, he notes. “Going forward, that will come down to zero with additional value-added capacities from AM/NS and others.” 

Tata Steel’s Chatterjee describes the rise of the automotive sector as a defining moment for the steel industry. “It enabled the industry not only to scale up, but also to build capabilities for developing higher grades of sophisticated steel products.” 

The Insolvency and Bankruptcy Code (IBC) also strengthened the industry’s capabilities. Through this process, Tata Steel acquired Bhushan Steel, JSW Steel took over Bhushan Power & Steel (BPSL), Ruias-led Essar Steel went to global steelmakers ArcelorMittal and Nippon Steel, while Electrosteel Steels was acquired by Vedanta. 

The steel sector was among the biggest success stories of the Reserve Bank of India’s (RBI’s) first batch of cases referred under the IBC, says sector expert Jayanta Roy. “The process consolidated debt-laden companies under stronger owners, setting the stage for the next wave of expansion.” 

Perhaps, the consolidation is also prompting foreign steelmakers to deepen their bets on India, a growing market. Japan’s JFE, a long-time strategic partner of JSW Steel, acquired a 50 per cent stake in BPSL. Meanwhile, South Korea’s POSCO plans to set up a steel plant in partnership with JSW Steel, after two decades of failed attempts to gain a meaningful foothold in the market. 

Om Prakash Jindal (far right), the founder of the O P Jindal group, with his son Sajjan Jindal (centre) at JSW’s steel plant in Torangallu, Karnataka, in the mid-1990s | PHOTO: JSW Steel

The capacity boom 

As companies race to expand India's crude steel capacity from about 220 million tonnes in FY26 to 300 million tonnes by 2030—a target set by the National Steel Policy—billions of dollars are flowing into the steel sector. 

Achieving that target will require sustained annual investments of around $15 billion, according to Crisil’s Singh. 

At the forefront of this massive expansion are the integrated steel players. The top four listed steelmakers plan to invest around ₹70,000 crore in FY27, versus about ₹50,000 crore in FY26, Singh adds. 

However, he notes that the next phase is about strengthening strategic depth. “While the industry remains heavily dependent on imported coking coal, self-reliance in high-value segments such as automotive, electrical and specialty steels is still evolving.” 

Yet, the sector has proved just how critical and foundational it is to India’s growth story. The consultant who, in 1995, dismissed steel as a sunset industry and advised the Tata group to exit the business would likely revise that verdict today, as the sector spearheads India’s private investment cycle.