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Having gone through a period of colossal damage, the government's imposition of minimum import price alone would not be adequate for the industry’s recovery. The mere validity of six months for MIP is not enough to realise a sustainable price level. The government would need to either extend this period or replace it with other protective measures with longer tenure.
The crash of steel prices and slack demand not only impaired the industry’s ability to service debt, but also brought it to the brink of operational paralysis due to the absence of adequate working capital.
Going beyond MIP, the government should increase investment on infrastructure to stimulate demand for steel. While the RBI policy of forcing banks for an early recognition of NPAs may be a good long-term measure, any hasty step, when applied on steel industry, could do incalculable damage. The lending norms for this vital manufacturing sector should be liberalised for 12-18 months.
A national asset management entity should be considered to provide capital inflows to service steel companies’ financing cost. The royalty rates on key natural resources, such as iron ore, are too high and should be pragmatically revised. Steel should be given special status as it is the core ingredient for the success of the ‘Make in India’ momentum. The Budget needs to rationalise the Cenvat credit scheme and freight costs for capital goods.
In India, manufacturing outfits are located in non-metros; consequently, the annulment of Cenvat facility on cross-unit utilisation in the capital goods sector is blocking funds.
Transfer of Cenvat credit will be in line with the Centre’s call for action on Ease of Doing Business.
Rationalisation of the prevailing high corporate tax rates is an imperative. Speedy introduction of the GST will pave the way for neutrality in indirect taxes. The Indian economy is on the path of gradual recovery. The growth momentum would face a setback if the focus is only on maintaining the fiscal deficit at 3.5 per cent of the GDP.
The writer is MD and Group CEO, Jindal Steel and Power
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