India’s steel sector is among the top global producers, holding the world’s second-largest position in crude steel production with an output of 125.32 million tonnes and 121.29 million tonnes of finished steel in Financial Year 23. This vast industry has seen tremendous growth over the past decade, reflecting a substantial 75% increase in production since 2008.
The consumption per capita stands at 86.7 kilograms, facilitated by easy accessibility to raw materials like iron ore and cost-effective labor. The National Steel Policy, rolled out in 2017, projects a crude steel capacity of 300 million tonnes, a production of 255 MT, and a robust finished steel per capita consumption of 158 Kgs by 2030-31.
Steel plays a crucial role in many sectors, including construction, infrastructure, automobile, engineering, and defense, earning its reputation as a widely used material worldwide. It contributes to about 2% of India’s GDP in FY21-22, further emphasizing its importance within the national economy.
Challenges Faced by the Indian Steel Sector
There are numerous challenges faced by the steel sector. A major one is the significant financial investment required to set up modern steel plants; the high cost of approximately Rs 7000.00 crores for a 1-tonne capacity plant can be prohibitive for many Indian entities.
Moreover, the sector experiences cyclical demand influenced by elements such as monsoons that slow down construction, resulting in financial challenges due to low-demand periods. Compounding this issue is India’s low per capita consumption of steel, reflecting economic disparities, and a lag in technological advancement in the sector.
Furthermore, the country’s reluctance to transition from traditional concrete-based construction methods to steel-based ones limits growth. Finally, the environmental concerns associated with steel production cannot be overlooked, as the sector is one of the three biggest producers of carbon dioxide globally.
The Impact of CBAM on the Steel Industry
From 1st January 2026, the Carbon Border Adjustment Mechanism (CBAM) will impose a carbon tax on each consignment of steel, aluminum, cement, fertilizer, hydrogen, and electricity. This initiative by the EU will negatively impact India’s exports of metals to the EU, leading to extra scrutiny under the mechanism.
Government Initiatives to Support the Steel Industry
To bolster the industry, the government has launched several initiatives such as the National Steel Policy 2017, Steel Scrap Recycling Policy, Fourth Industrial Revolution adoption, Steel Research and Technology Mission of India, Draft Framework Policy, and the PLI Scheme for Specialty Steel.
The Way Forward for the Steel Industry
To tackle these challenges and future-proof the industry, India needs to invest in and adopt green technologies to reduce environmental impact and foster sustainable production practices. These measures can include manufacturing Green Steel using low-carbon energy sources. Enhancing carbon efficiency in steel production can also help manage the impact of CBAM.
Moreover, promoting cleaner, more sustainable technologies can significantly reduce the carbon footprint of steel products. Engaging in dialogues with policymakers and international bodies to advocate for fair and realistic CBAM policies is also essential. Collaborative efforts with other industries and countries can lead to solutions that consider the unique challenges faced by the Indian steel sector.