In a bid to rein in all-time high steel prices, the government imposed 15 per cent export duty on a range of finished steel products.

Steel exports are now seeing a pronounced drop of up to 20 per cent and prices in the domestic market have fallen by 8- 10 per cent since the Centre levied the export duty on finished products such as bars, wire rods, angles, hot-rolled coil (HRC) and cold-rolled coil (CRC) that accounted for nearly 95 per cent of India’s finished steel export.

The steps taken by policymakers to reduce the cost of finished steel, a key raw material for the manufacturing sector, should make the exports of value-added products like engineering goods, automobiles and parts, tractors and agri-implements more competitive.

But to take on China and make India a global manufacturing hub, much deeper, long-term reforms are required in the steel sector.

Nearly 40 per cent of the iron ore produced domestically is exported, that too mainly to China. To curb the export and ensure smooth supply in the domestic market at low prices, 50 per cent export duty on iron ore followed by import duty reduction on ferro nickel, coking coal, and PCI coal to nil from 2.5 per cent will help the handful of giant steel players (five to seven of them) also reduce input costs and boost domestic supplies.

In a democratic setup like India’s, everyone is free to make a profit out of business but not at the cost of exploitation of natural resources. The sheer profit motive of the giant players has taken the sheen off the steel sector. In the last two years, there was an over 1,000 per cent increase in the profits of these 5-6 giant steel players; around ₹2-lakh crore has gone into their pockets (one company registered profits of ₹33,000 crore in FY22, the highest among the steel giants).

However, the 6.3 crore MSMEs — the key players in the manufacturing sector, employing over 11 crore, having 24 per cent share in GDP and 40 per cent in exports — have been under stress since mid-2020 due to high steel prices. The items produced by MSMEs, which are largely consumed by the common man, faced inflationary pressures due to skyrocketing steel prices.

According to market intelligence agency SteelMint, in April 2022, HRC prices soared to a multi-year high of ₹76,000 per tonne and CRC to ₹79,000/tonne. In May 2020, both HRC and CRC prices ruled at ₹41,500/tonne — a 95 per cent jump in the last two years.

Whatever be the justification handed out by the steel giants, the harsh reality is that the relentless rise in steel prices has hit the downstream manufacturing sector, infrastructure, households and farmers hard.

The way forward

There are multiple implications if natural resources are allowed to be controlled by a handful of players. It violates the spirit of Article 39 (b) of the Constitution, according to which the state owns natural resources on behalf of the actual owners — the people of the country. Thus, natural resources should be distributed to best serve common good.

The lack of transparency and fairness in the distribution of natural resources is a clear deviation from the inclusive model of ‘Sabka Saath, Sabka Vikas, Sabka Vishwash, Sabka Paryas’ and make India ‘Atmanirbhar’. The policy of controlling steel prices to dilute the monopolistic and cartelisation approach of giant steel players’ distribution of natural resources may be out of judicial review, but the method of distribution is not.

There is no transparency and fairness in the distribution of natural resources. Resultantly, a handful of companies are enjoying monopoly over iron ore, which is being converted into huge profits and not infused in the ecosystem of the manufacturing sector.

Hence, a holistic and collective approach is needed for steel pricing to make India a vibrant manufacturing hub.

The writer is Vice Chairman Sonalika Group and former Vice Chairman Punjab Planning Board