Reactions from Indian steel industry leaders to some of the provisions of the annual budget that was just passed have been a mixed bag.
Overall, industry players were in agreement that the annual budget exercise would push big-ticket infrastructure projects. Stress on infrastructure means more consumption of steel.
India’s first woman finance minister, Nirmala Sitharaman, announced fresh projects, including augmenting as much as 125,000 kilometers of rural roads, setting up more industrial corridors, & extending railway infrastructure, according to moneycontrol.com.
Steel company CEOs, like Chairman of Steel Authority of India Ltd (SAIL) Anil Kumar Chaudhary, told the Press Trust of India (PTI) that these were “welcome steps.” Billions of dollars have been earmarked to be spent every year on developing and reinforcing infrastructure.
The SAIL chairman’s rival, Tata Steel CEO and Managing Director T.V. Narendran, saw good news in the budgetary provisions. He said the provisions would boost the domestic steel market, which has otherwise been in a state of decline.
N.A. Ansari, joint managing director of Jindal Steel and Power Ltd., told reporters that improving railways through the public-private partnership model was an “opportunity” for India’s steel industry.
One day before the budget, as is the norm, the Economic Survey report was released, which reflects the health of the Indian company. That report has estimated the country’s steel output to hit 128.6 million tons (MT) by 2021 and consumption to reach 140 MT by 2023 on the back of investments in infrastructure, construction and automobile sectors.
On a macro level, the steel majors have welcomed the union budget; on the ground, smaller players have raised some red flags.
Integrated steel players in stainless and carbon steel did not join the cheering.
The budget proposal to hike customs duties on stainless steel items from 5% to 7.5% will rein in imports of semi-finished products by the unorganized sector of domestic producers. As K.K. Pahuja, president of the Indian Stainless Steel Development Association (ISSDA) was quoted in the Economic Times as saying, “This will barely change the scenario as there is little import of these semi-finished stainless-steel products in the country.”
Where imports do make a large dent in India is in stainless steel flat products, where its share is about 20%. This sector does need government protection, but a call to hike tariff rates was met with no success.
Large integrated steel producers face the threat of cheap steel being diverted to India after the U.S.’s decision to impose tariffs on Chinese and Vietnamese steel products. Because of it, the Indian Steel Association has been asking for an increase in the customs duty.
The finance minister did propose to cut customs duties on certain inputs for making cold-rolled grain-oriented sheets or electrical steels — used in critical power equipment — from 5% to 2.5%, according to the Economic Times. This has been welcomed, as it would encourage domestic production of such steel products in the country.
And Now, Over to the U.S. President…
A few days from now, representatives from the U.S. and India will meet to try and break the trade impasse between the two countries, on the heels of India’s new tariffs on U.S. goods.
On Tuesday, though, Trump tweeted, “India has long had a field day putting Tariffs on American products. No longer acceptable!”
The tweet was enough to raise eyebrows in India.
India had finally imposed retaliatory tariffs on 28 U.S. products, including steel products, from June 5 after over a year’s delay.
The move was aimed at countering the increase in steel and aluminum tariffs by the U.S. and its withdrawal of duty-free benefits to Indian exporters. India also raised customs duties on a host of products, including alloy steel and auto parts, in the budget presented July 5.
The fresh tweet by the president is being read in India as a pressure tactic before the new round of negotiations begin.