Steel Industry

Steel is manufactured as a product with no major trade barriers across national boundaries to be seen currently. Steel production in India has increased by a compounded annual growth rate and steel continues to have a stronghold in traditional sectors such as construction, housing and ground transportation. Special steels are increasingly used in engineering industries such as power generation, petrochemicals and fertilizers growth in India is projected to be higher than the world average, as the per capita consumption of steel in India. India occupies a central position on the global steel map. The growth of the steel industry worldwide through mergers and acquisitions has already thrown up several significant concerns. The domestic steel industry has become market oriented and integrated with the global steel industry. The private players could expand their operations and bring in new cost effective technologies to improve competitiveness not only in the domestic but also in the global market. Private sectors contribution to the total output has thus been increasing in India. Development of the private sector has caused a tremendous growth in all aspects of steel industry that is capacity, production, export and imports.

The steel industry is showing promising future growth as major players in the industry have announced their plans for significant investments in expanding their capacities. Rapid development of the steel industry with active participation of private sector and integration of India steel industry with the global steel industry has also induced the government to come up with a National Steel Policy in 2005. The pre-reform steel market in India was controlled in all relevant areas. Competition was restricted in this market that had no real role to play in the growth of the individual companies or their performance and the allocative efficiency of investible resources. The prices fixed by the government were more on political consideration and not strictly on the basis of costs of production or markets demand and supply balance. There are no facts to establish that there is formal or ‘written down’ agreements on prices among the major players. There must be difference between situations such as (i) price rise necessitated by factors external to the industry e.g. increase in capital cost, rise in border steel prices and hence erosion of profitability and (ii) expectation of demand-supply gap providing an opportunity to increase profit Intervention by the government on matters of pricing steel long products also in the recent times has also pointed to the acceptance of the government that the major steel producers have substantial value in the market and act according to the substantial net impact on the market to move the trends in the desired direction. Steel sector was the first to be liberalized and there are enough players; though the industry is concentrated in some segments. However, this in no way suggests that the sector should be subject to regulation, which also includes the government. Regulations must be restricted to market failures like natural monopolies, externalities and asymmetric information between buyers and sellers. The government’s current approach to informally control steel prices is based on the assumption that a few steel detailing course in kochi producers have sufficient command over the market and that they can be discussed to uniformly cut prices to whatever objective to fulfill.