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Draft policy for foreign firms buying steel companies

Swati Prasad

The draft national steel policy envisages removing all hurdles facing foreign companies wanting to acquire steel companies in India.

"The government would encourage foreign direct investment in the steel industry for mergers and acquisitions even when such mergers and acquisitions are to involve a foreign company," the draft policy says. In fact, the government would also liberalise the restrictions on acquisition of foreign companies by domestic players.

As per the draft, consolidation of small steel making units and stand alone rolling units would be encouraged. With this objective, a Small Steel Industry Reconstruction Fund would be created to provide loans to the industry for modernisation, restructuring and consolidation.

The draft also talks about promoting efficiency in the public sector units and encouraging the rationalisation of manpower through adoption of voluntary retirement schemes or relocation. And it also seeks to monitor trade and hold talks with the major steel importing countries.

"The government is committed to strengthen the anti-dumping institutions in the country to prevent unfairly traded foreign products," it adds.

It recommends strengthening the Steel Exporters' Forum and entrusting it with the responsibility to monitor possible cases of dumping.

"The government would announce in advance a road map for import reduction in steel and other related products so that the industry has enough time to prepare itself," the draft says.

The drafts say the government would encourage purchase of steel by government or quasi-government agencies only from the domestic industry. It also states the obvious - "the government would not involve itself in investment in steel capacity creation any further by setting up greenfield plants."

It also mentions that the government would reassess the existing import duty reimbursement schemes to make these more user-friendly. "While doing so in a transparent manner, due attention would be paid to the existing rules of the WTO," it adds.

The policy has chalked out 34 different initiatives that the government would undertake to make the Indian steel industry "world class and globally competitive."

The draft has not gone down well with the industry, which sees an increased role for the government, as spelt out in the draft, after 10 years of living in a deregulated environment. The draft has been prepared by the Joint Plant Committee.

Through these policy measures, the government is targeting an annual production of 55 million tonne of steel by 2010. The current annual steel production is 26 million tonne.

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