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Target a domestic steel capacity of 150 mt by 2020: Aruna Sharma

In an interview to CNBC-TV18, Aruna Sharma, Steel Secretary said that national steel policy is a visionary statement for domestic steel industry.

The cabinet has approved the new national steel policy. This is aimed at bolstering growth for Indian steel makers who are facing troubles due to cheap imports.

In an interview to CNBC-TV18, Aruna Sharma, Steel Secretary said that national steel policy is a visionary statement for domestic steel industry.

She further said that the target for domestic steel capacity is 150 million tonne by 2020.

On iron ore front, she said there is an excellent iron ore reserves in India and therefore looking at utilising them.

Below is the verbatim transcript of the interview.

Latha: Is it one of the parts of this policy to encourage both government sector and private sector to consume domestic steel before looking at imports? Is there anything in this policy that will give the domestic steel producers an advantage when it comes to orders placed by the government?

A: There are two documents which have been approved by the cabinet yesterday. One is the steel policy which is a visionary statement, which is giving a vision for 2030, how we are going to go about import replacements, how we are going to go about reducing the production cost, how we are going to go about enhancing the domestic consumption.

The other policy, the response to your question, which is a preferential treatment for procurement by government and its agencies of steel made in India. So, Make in Steel, Make in India – under that policy on equivalent quality basis and competitive rate, the preference will be given to the steel made in India. This will give a boost to Indian manufacturers, this will also encourage foreign direct investments (FDIs) so that anybody who wants to be a participant in this will be welcome to establish steel making within the geographical boundaries of the country.

Sonia: This preferential treatment is a big positive but I also wanted to ask you about the projection to grow the capacity to 300 million tonne by 2030 because the issue now is one of demand. Demand seems to be very low at the moment. So do you think adding capacity at this point in time is a prudent thing to do because currently there is quite a bit of overcapacity in the system, right?

A: You are absolutely right on that that in India we have a capacity on date of 126 million tonne and this year we made a big jump and also the domestic consumption has gone up by 3 percent, so, in the sense that it has started showing an upward trend.

If you look at the domestic consumption, we are abysmal low. Now with the usage of steel in the housing sector, in the rural housing sector in a big way, that itself will give a big boost. Steel being a deregulated sector, 150 million tonne will be easily reached by 2020 because it is already in process, like both the public and the private sector investment will start fructifying.

Latha: At the moment the world is itself reeling under huge overcapacity. We have been complaining of dumping by China, haven’t we, and even you have made policies to bolster India. So in that situation why are we increasing capacity?

A: We have to understand how we define excess capacity; it is in totality or is it the geographical bound. This has been debated in the global forum, where India is in the committee, because if domestic consumption is on par, like in India 85 percent we domestically consume, we exported only 8.2 million tonne, we imported 7.4 million tonne.

So, in the sense we are a country where domestic consumption and it makes a lot of sense that if India is going to consume the steel and we have an excellent iron ore with us that we should make our steel instead of importing to the requirements which are going to come in future. Definitely the market forces will decide how much of investment goes into the sector.

Sonia: I think the worry is that, the worry is that who is going to really fund this expansion because if you are looking at 150 million tonne by 2020, I understand that every 100 million tonne will cost almost Rs 7 lakh crore. That is putting a lot of pressure on the government at a time when there is so much overcapacity already?

A: The overcapacity is definitely not in India. So, that is not a point of worry at all. Definitely the utilisation is going up, the non-performing asset (NPA) jam is getting eased out and the sector is making profit. If you look at the 2016-2017 graph of sector, definitely it has done. Let me correct you that 51 percent contribution in the 300 million tonne will also come from the secondary sector where the investment is only Rs 2,500 crore per million tonne. So, in the sense you will have less investment, more steel capacity, better quality regime which will be coming out very quickly. So, blast furnace route is not the only route on which it will be going. There will be other routes also.

The input cost consciously we are trying to bring it down so that will be very competitive. So, in India we are very clear that with the 7 percent growth rate and our contribution, the steel contribution in gross domestic product (GDP) last year has gone up more than 2 percent. Generally we used say it is 2 percent, we have crossed 2 percent and become 2.3 percent. So, with this kind of a contribution, with the growth rate in India continuing to be 7.3 percent and infrastructure consumes more and more of steel, Rs 400,000 crore per annum if it is going in infrastructure, and in that if the bigger percentage comes from the steel, then definitely domestic need is going up. Now the choice is whether it is our steel or outside steel, but definitely answer is our steel.
Source: Money Control

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