The government has allowed usage of steel produced by secondary steel makers for construction of highways. Earlier, road developers were required to use steel produced only by the primary steel producers in highways construction.
The move comes in the wake of rising prices of steel supplied by primary steel makers. Minister for road transport and highways Nitin Gadkari has been vocal as major steel companies were on the price hiking spree for the last few months, mainly taking cues from their international peers.
While Gadkari took the matter to the Prime Minister seeking his intervention, steel firms justified the price hike to rising prices of iron ore.
Gadkari’s concerns were partly addressed in the Budget for 2021-22 in which steel imports were made easier by lowering customs duty on a range of products and granting duty exemption on import of steel scrap, used by secondary steel makers.
According to India Ratings, domestic hot rolled coil (HRC) prices (Mumbai 2.5mm-8mm) inched up 45% year-on-year and 3% month-on-month to Rs 57,000/tonne in mid-January 2021. India had produced 103 million tonne of finished steel in 2019-20 out of which around 45% was produced by the secondary steel producers.
Apart from reining in the integrated steel makers from jacking up prices further, the latest move will also widen the scope of sourcing and will provide a cushion to the secondary steel producers who were hit hard by the pandemic.
“With this step, the supplier base for steel used in the construction of national highways would increase, leading to more competition and better price discovery by the markets. This is also part of the continuous effort by the minister to reduce costs through use of new technology, reducing restrictions on suppliers and making the procurement system transparent,” the ministry for road transport and highways said in a statement on Sunday.
In view of the increase in steel prices, which can impact the cost of building national highways, Gadkari had earlier suggested the need to re-look at all conditions which could be restrictive, without impacting the quality of material used for highway construction.
In the statement, MoRTH said all steel – whether produced from ore, billets, pellets or melting of scrap – would be allowed to be used for national highway construction, as long as it meets the standards required for specific grades of steel.
“The move is based on the analysis and discussions with stakeholders and also technical opinion,” it said.
During the April-December period of the current fiscal, India imported 3.21 million tonne (MT) steel, down by 42% over the corresponding period last year. During December 2020, import decreased by 41.8% over December 2019.