The Ministry of Steel has just released the Draft National Steel Policy: Vision 2047 with several objectives. These include making Indian steel globally competitive and increasing steel exports to 45 million tonnes (Mt). These are admirable objectives, but they do need clarity on what globally competitive means.

In one sense, the industry has done well. From producing less than 5 per cent of global steel and ranking ninth in 2000, India has become the world’s second-largest steel producer at 170 Mt. Of course, we are very far behind China at 961 Mt.

The steel industry certainly looks good if competitiveness means profitability. The average profitability (EBITDA over sales) for the period 2000-25 was around 15 per cent, which is 3-4 per cent higher than the rest of Indian manufacturing. The profitability of the top three Indian steel firms is also 3-4 percentage points higher than their biggest global counterparts (2015-24). But does this profitability reflect greater efficiency or high protection? The answers to this are instructive.

One reason why profitability is high is because we keep iron-ore prices low. An export duty of 30 per cent on iron ore with more than 58 per cent iron content makes the domestic price of the ore 30-40 per cent lower than global prices. In effect, our iron-mining resources are underpaid to benefit the steel industry. This also lowers the incentive to mine, causing economic loss for mineral-rich regions.

India’s steel industry also benefits from tariff protection through a 7.5 per cent import tariff, with an 11.5 per cent safeguard duty, which makes the duty rate 18 per cent. The comparable tariff in ASEAN is between 3-4 per cent. There are also non-tariff barriers in the form of Quality Control........

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