DNA reported that Mr CS Verma CMD of Steel Authority of India Limited and chairman of CII National Committee on Steel believes that the free trade agreements with Korea and Japan are wrecking havoc for the industry. He spoke to Mr Dhwani Pandya of DNA about the key impediments faced by the domestic industry and measures like higher investment in infrastructure, faster land allotment and environmental clearances that are required to help the sector.

Q - What are some of the key issues you want the new government to address in the upcoming budget?

A - The key issues on which help is being sought by the steel sector in the upcoming budget is exclusion of steel products in the Comprehensive Economic Partnership Agreements with Korea and Japan extending help to the financially stressed stainless steel sector looking into the duties for import of steel to extend support to the domestic industry, etc.

Q - Should steel imports under FTAs with Japan and Korea be reduced to help the domestic industry?

A - Although the imports in 2013 to 2014 reduced because of low demand growth and increasing domestic supplies, import from Korea and Japan have been significantly increasing in the last few years. As the global crude steel capacity utilisation is still hovering at around 80%, there is a need to monitor and review the flow of steel from the nations with whom we have signed FTA to the extent necessary to help the domestic industry.

Q - Should government increase exports duty on iron ore pellets from 5% currently? How is that likely to help the sector as very few steelmaker buy pellets from the market?

A - We are of the opinion that the country stands to gain the most if its natural resources like iron ore are used by the domestic industry in order to add maximum value to the resources and generate employment. In this context, the export duty structure of iron ore pellets, which essentially is an agglomerated form of iron ore fines, needs to be similar to that of iron ore lumps/fines, in order to first meet the domestic requirement.

Q - What step do you want the government to take to improve demand of steel consumption in the country?

A - At present the economy is at a stage where infrastructure is required along with the recovery in growth of manufacturing sector. Steel is a key input in the construction, machinery, ship building, oil and gas, consumer durables and automotive sectors. Projects in these domains need to be accelerated and augmented. We do hope that the government comes with sectoral initiatives to bring back good growth in these key segments.

Q - Greenfield steel projects in India have suffered severely in past few years due to delay in environmental clearances and land allotment. Do you expect any specific steps from the government to resolve this?

A - Inputs for steel making are concentrated in geographically ore-rich states of Odisha, Chhattisgarh, Jharkhand and Karnataka. Lack of consensus among land owners for giving land, paucity of realistic benchmarks for land pricing, etc are bottlenecks for the land acquisition process as a whole. We are hopeful that a pragmatic land acquisition policy that is mutually acceptable is put in place so that the land requirements for industrial and infrastructural needs are met expeditiously. The government has already identified environmental clearances for projects a priority area. Procedural delays can be cut and timelines determined for various clearances including environmental issues for which in-depth studies can be carried out for determining the overall impact.

Q - Is there a need to promote foreign investment in the steel sector? Would competition do any good for domestic steel industry?

A - Steel sector is open for 100% FDI. There is a growing need to build up steel capacity to meet the expansion in domestic demand anticipated in the medium to long term. According to a study done by BCG, India may require to set up a capacity of around 300 million tonne by 2025. So far as the enhanced domestic competition goes, that is a given for any player in the steel industry. We have been working in a non-restrictive policy regime with low tariff barriers for a number of years. The industrial turf would remain competitive with some international steel majors set to start operations in coming years. The issues which today constrain the domestic players from setting up greenfield capacities such as land acquisition, raw materials linkages, etc are also the reasons that have hampered foreign investment in the steel sector in India. These have to be addressed for expansion in domestic capacity in coming years.