Govt may mandate use of domestic steel in infra projects

The Indian government is likely to issue a mandate wherein companies implementing government infrastructure projects will have to use domestically produced steel, according to media reports. The move is aimed at increasing domestic production and slowly moving away from Chinese imports.

The move will also encourage foreign investments in the Indian steel industry by big steel makers from around the world. The government has earmarked US$59 billion to steel intensive infrastructure projects such as roads, railways and power.

India wants to triple the steel production by next decade and acquire new technology to produce high quality products such as automotive steel. The mandate will also ensure creation of new jobs as the incremental steel demand will require more manpower to meet the production demand.

However, incremental production will also require excess capital, which remains a challenge for the industry. The steel industry accounts for 29 per cent of the overall bad debts of around $135 billion of the banking sector.

This mandate will represent a major overhaul for the Indian steel industry as it will seek to replace cheaper Chinese imports. The Chinese imports doubled in 2015-16 from 2013-14 levels, due to which bottomlines of many Indian companies turned red