India will be Number 2 steel producer surpassing Japan soon, says steel secretary Aruna Sharma

At a time when the steel sector is grappling with not just low levels of demand, but also tough competition from its eastern neighbours like China, Japan and South Korea, steel secretary Aruna Sharma says there is good news right around the corner. Sharma, who has been steel secretary for less than a year, is positive about one of the core sectors in the country which has a direct relation with industrial performance. She says in an interview to Firstpost that the government is waiting for quarterly steel production numbers to make the big announcement that India has surpassed Japan to become the number 2 steel producer in the world.

Edited excerpts from the conversation:

Even though the cabinet last month cleared a policy to treble steel production by 2030, there isn't an equivalent increase in demand. Do you think it makes business sense to increase production at a time when demand is low?

We are consuming only 60 kg per capita, and any developing nation that wants to become a developed nation cannot afford to do that. Somehow, in the infrastructure sector, there have been alternate materials with low life-cycle cost. So now, we are focusing completely on enhancing the domestic demand. We had a GFR (general financial rules) amendment where the calculation of life cycle cost is now mandatory. We have also made it mandatory for all levels of government - Centre, states and its agencies to procure steel that has been Made in India.

Having said that, we had a five percent growth rate last year in domestic consumption, not very high but reasonably good. Our target is to reach 150 tonnes by 2022, from the current 85 million tonnes. When we reach 150 million tonnes, our consumption has to be 140 million tonnes. That gap has to be covered, but there is a big market. If you look at all bridges, crash barriers, buildings that are more steel intensive -- all of this will make a lot of difference as there is a huge gap that we have to cover. Across the globe they have gone for steel structures, as it is recyclable, zero maintenance and you get back the cost. That culture has to come to this country and that's where our focus is. We are educating the structural engineers and contractors so that demand will increase.

PM Modi has given a call to 'go to the top' in terms of steel production in the country, and that means surpassing China. Do you think that's possible in the near future? And how?

China is the largest producer of steel, nearly 800 million tonnes and we are targeting to plateau at 300 million tonnes. We will then be number two. We are already number three. In fact, if you compare the figures of March, April, and May, we have surpassed Japan. We are just waiting to declare ourselves number two once we get the quarterly results or half-yearly results. But there will be a huge gap between number one and number two. There is no point in targeting 700 million tonnes. We will plateau at 300 million tonnes and definitely not less than that. The entire steel [industry] is saying that India is the bright spot. Most of the countries have plateaued but we will be on the growth trajectory. With 7 percent growth rate, steel demand is bound to go up. It has to go up. With this preferential procurement, we expect [to get] FDIs (foreign direct investments). Everyone will invest to make steel in India and there is no looking back. We will definitely achieve that.

But dumping from China is also a concern.

We did some very focused targeted intervention. One was anti-dumping, which is completely WTO (World Trade Organisation) -compliant. We are not against imports. Imports are welcome, but dumping is not. That’s where we draw a line. We are focusing on bringing down the import costs. Productivity has to improve considerably, to which the industry has responded well. We are also enhancing domestic production. That will be the formula for success.

A slew of measures like imposition of MIP (minimum import price), anti-dumping duty and safeguard duty have been imposed on cheap steel imports, but how long do you think we can continue with them especially since some countries like Japan have taken up the issue at the WTO?

Japan doesn't have a case in that because what we import from Japan is at a cost much above our benchmark rate of anti-dumping. MIP, which was a temporary measure, is zero now. Anti-dumping is WTO-compliant and the minimum rate which we have fixed and the quality of automobile steel which we are getting from Japan is much above that. So, they don't have to worry much. Now that we have extended anti-dumping for five years in 124 items, they are comfortable. We will encourage that more [so that] automobile steel gets manufactured in the country. Our tariff barriers are legal and correct as per international norms.

Aruna Sharma, Steel Secretary. PIB pic

Aruna Sharma, Steel Secretary. PIB pic

Have we drafted a response to Japan's complaint? Have we submitted it at the WTO?

They (Japan) are aware about it. They have also seen the final order of the DG (director general) on anti-dumping on that and are comfortable with it. The case will continue. The arguments will continue, but there is no case for us to lose. A formal reply has been submitted at the WTO and it has recommended bilateral discussions. This is a quasi-judicial proceeding done through the DG.

How important a role does branding play in case of enhanced usage of Made in India steel? What is the plan to lure the private consumer industry to use steel that is domestically produced?

We have gone for BIS (Bureau of Indian Standards) for 33 highest items in any ministry. In India, 57 percent of steel comes from the secondary sector, 24 percent from the private sector, and 19 percent from public sector undertakings (PSUs). There is no compromise in terms of quality. We are giving them a level playing field but they will have to work hard to enhance their profitability by reducing their production costs. This is what will make a difference.

Steel will be available in the country [for them to use]. In the automobile sector, already JSW Steel and Tata Steel have ventured into joint ventures with two Japanese companies and are making it and selling it, too. POSCO has established a plant. SAIL is planning to enter with Arcelor Mittal and they will produce automobile steel. The kind of steel required for buildings is 99.9 percent domestic steel and hardly anything needs to be imported. The industry is now manufacturing ready-to-use and tailor-made steel, which is used for housing and is now coming into the market. Custom-made designing for bridges is also coming into the market. The way a structural engineer will design, that’s how the steel industry will manufacture. This is how it will move forward. Time has come for us to switch over as it [steel] is also environment-friendly and replaces timber. It is non-corrosive, no maintenance. The life cycle of steel is from 100-200 years.

What is being done to boost research efforts in the steel sector? Are incentives being given to private players to help put in more money for Research and Development (R&D)?

To continue to be leaders in [the] steel [industry], we can't just continue to be leaders in making steel. We have to come up with research and development [to develop] better products. For this, we are constituting an organisation called SRTMI - Steel Research and Technology Mission of India. The steel industry will contribute [towards] it and will be governed by it. We have chairs in three Indian Institutes of Technology (IITs) who will also support this. We have already [achieved] success [in one of them]. Indigenous research helped us bring down the phosphorous content in secondary steel. This ensured sturdier steel. But we have lost the game in the last two decades where we don't have the technology for automobile steel, electric steel. So, our first step will be to have JVs (joint ventures) or FDIs (foreign direct investments), which we are doing. But we have to come up with better technology for the future and better parameters.

The sector has some of the biggest NPAs (non-performing assets). How are the talks with the banking system coming along? What are some of the solutions being discussed?

This was a badly stressed sector and it was a problem we were grappling with at the beginning of last year. So we had a meeting with the Indian Banker's Association and the first thing we did was to revive the sector with measures like anti-dumping, production costs and power costs.

Once the sector started reviving and showing an upward trend, we had a meeting with the banker's association. The banking association also realised that this is a sector that can pay back. The finance minister chaired a meeting and a formula was worked out between the banks and the (steel) companies. To give it a more formal shape, the new ordinance of the Reserve Bank of India (RBI) came out. With this ordinance, bankers are fully equipped and the steel sector will be the first to get advantage of this ordinance.

Bankers now have confidence and have started getting their money back. The Equated Monthly Instalments (EMIs) are being paid from the last one year. So, the confidence of bankers has gone up. To walk [a] few steps, [we have to] handhold them and reshape their loans. We are expecting final results any time now. Once this is done, there is a requirement of 40,000 crore per annum investment in the sector. With the trajectory going up, this kind of investment is not a big amount.

What will the ordinance do to help the steel sector?

It is an ordinance for bankers, not the steel sector. And it is the bankers’ decision to reshape the loan. We are just creating an environment so that [the] sector and investment is protected. There is a need to have a strong forensic audit  -- so that the money is not diverted elsewhere, right kind of money  [is invested] and there is no excess lending. Then the sector will thrive.

How long will the turnaround of the sector take?

It should not take long. The bankers’ money has to be safe and they [steel industry] have started repaying their current EMIs. Industry by industry, owner by owner, they [banks)] have come up with a formula.

We don’t have the technology for automobile steel or electric steel or even high-end steel. What are we doing to ensure that we aren’t left behind?

SRTMI is a long-term measure but the immediate answer is joint ventures (JVs) and Foreign Direct Investment (FDIs). That is the only way to get high-end technology. Each of them [steel companies] has to evolve towards high-end technology because that is where the money is. That steel is sold at a premium. What we are envisaging is that an integrated steel plant, besides producing crude steel, should target to make high-end steel. And rest of the steel should be left to the secondary sector. That is how it should evolve.

And is the industry on board with this?

Definitely on board because of the kind of investment they are making. A secondary steel plant has an investment of Rs 2,500 crore per million tonne and integrated steel plant has an investment of Rs 6,500 crore per million tonnes. At the end of the day, if both are going to make Bureau of Indian Standards (BIS) stamped Thermo-Mechanically Treated (TMT) bars, it doesn't make sense. They will have to evolve themselves to make high-end steel.

Published Date: Jun 20, 2017 03:00 pm | Updated Date: Jun 20, 2017 03:01 pm

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