Steel firms are seeking higher government spending on infrastructure sector, which will help boost sales of the alloy, while leaving the stimulus package untouched in the budget 2010, officials said.
Indian economy is likely to grow around 7.5% in the fiscal year 2009/10 on revival in domestic demand and steel makers said the stimulus package should remain intact for this growth to sustain.
"In spite of our impressive GDP growth, infrastructure facilities remain inadequate. The budget has to provide impetus for major investments in infrastructure," SK Roongta, chairman, Steel Authority of India, said.
"If the stimulus package is sought to be withdrawn by the government it may be done in a phased manner," he added.
Finance Minister Pranab Mukherjee will unveil the federal budget on February 26 and is expected to begin gradually withdrawing of concessions granted in 2009 to lift economic growth amid global turmoil, a Reuters poll showed.
He left the steel sector untouched in the last budget despite demands of curbs on imports of cheap steel and export tax on iron ore to ensure supplies to local producers.
However, a 45% rise in allocation to Bharat Nirman infrastructure programme and Rs 20 crore for rural housing have helped, analysts said, adding they expected the government to announce more investments into infrastruture while leaving taxes unchanged.
"Probably, we won't see a withdrawal of stimulus package right now. If the GDP numbers are above expectations, we can see a gradual withdrawal later," said Giriraj Daga, analyst at Khandwala Securities.
"Right now, the spending they will announce for infrastructure will be good for metals," he added.
Curb imports
Steel makers have also reiterated their demands for a curb on imports, mainly from China and the 54-member Commonwealth, the geographically diverse group of mostly former British colonies.
"Government should take a corrective step to stop the dumping of steel. Lots of imports are taking place because outside India the market is not doing so good," said Anil Surekha, executive director, finance at Ispat Industries Ltd.
Steel demand in India has risen 8 percent so far this fiscal year, powered by reviving consumption from housing, auto and infrastructure. The growth is underscored by the fact that steel production around the world fell 8% in 2009 as demand from key industries shrank in a global downturn.
Earlier this month, the government lifted a curb on imports of hot-rolled coils — a vital input for sectors like auto and consumer goods — allowing traders to import in small quantity.
"This country is poised to see very large investments in the steel sector. If proper action is not taken, investors won't be comfortable coming into India," Surekha added.
Foreigners are expanding footprints into India joining hands with local players to set up new facilities. State-run Steel Authority of India is in talks with South Korea's POSCO to raise co-operation between the two Asian giants.
Besides, JFE Steel, the world's No. 6 steelmaker and JSW Steel are in a production tie-up and may take stakes in each other while Japan's No. 3 player Sumitomo Metal is considering a joint venture with Bhushan Steel.
Source : moneycontrol.com