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New steel policy may ease global buyout norms

Ishita Ayan Dutt

The National Steel Policy proposes to liberalise all restrictions in acquiring foreign companies by domestic steel companies for global consolidation of their business.

Steel ministry officials said the ministry is keen on relaxing the control on shares and capital. "The domestic company was earlier able to acquire only 49 per cent of the foreign company which did not give them a majority in the foreign company. The government plans to do away with this restriction" said the official.

The draft states that the government would encourage and create conditions for restructuring and consolidation of the Indian steel industry through mergers and acquisitions. The government would also encourage thorough policy tools and cross border M&As keeping in mind the needs of the global economy.

The draft, which was submitted recently in Delhi mentions that the government would also encourage foreign direct investment in steel industry for M&As, even involving companies outside the country.

However, steel ministry sources said the draft policy is likely to undergo some changes as the industry is peeved over the excessive government control on the industry proposed in the draft. The final policy is to be submitted within the next six months.

In view of low investor confidence in the steel companies, as part of future strategy to finance new steel projects, the government may engage itself in planning the investment funds through constant interaction with the financial institutions and banks under its control, if required. The government can also stipulate norms with regard to raising funds from the capital market to safeguard small investors.

The government may formulate a long-term resource plan for the steel industry, which would include a detailed planning for raw materials and infrastructure, investment requirement and mobilisation of funds for that.

Further, government agencies may be strengthened, reoriented or created to monitor investments in the steel industry and advise the government for appropriate action to safeguard public interests.

The government would also strengthen the anti-dumping and safeguard institutions in the country to prevent unfairly traded foreign products with a special institutional arrangement devoted to iron and steel. A necessary institution is also likely to be set up to maintain continuous dialogue and exchange of information with industry and government bodies in major countries importing steel from India, in line with the Indo-EU Working group on Steel.

The move to formulate the National Steel Policy was triggered by the continuous recession plaguing the industry. Moreover, the per capita consumption of Indian steel has been stagnating at 24 kg compared to world average of 150 kg. The per capita consumption of steel in Japan is 600 kg and 400 kg in the US.

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