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The Union Budget 2025, to be presented by the Finance Minister Nirmala Sitharaman, is widely expected by the industry and infrastructure stakeholders for the steel sector. As infrastructure development, domestic production, and environmental conservation receive unrelenting attention from the government, the budget is expected to include policy or measures that may define the future of steel production in India as well as future demand.
Infrastructure Push to Drive Steel Demand (Industry Expectation)
What is expected?
Government-driven infrastructure investment has a significant impact on steel demand. The last Union Budget (2024) saw a 33% increase in capital expenditure, boosting steel consumption. A similar trend is anticipated this year, with potential announcements on:
- Railway & Metro Projects: Expansion of railway networks, high-speed rail corridors, and metro development in tier-2 and tier-3 cities.
- Roads & Highways: Increased allocation for Bharatmala and PM Gati Shakti, driving demand for construction-grade steel.
- Urban Development & Smart Cities: Additional funding for Smart Cities Mission and urban transport initiatives.
- Affordable Housing: Boost in PM Awas Yojana (rural & urban), increasing steel demand for housing projects.
Industry Takeaway
An increased infrastructure budget will directly drive steel demand, benefiting large manufacturers and MSMEs in the construction materials sector.
Import Duty Reforms on Raw Materials (Industry Expectation)
What’s Expected?
India’s steel industry depends on imported raw materials such as coking coal, ferroalloys, and scrap steel. The industry is advocating for:
- Reduced import duties on coking coal: Mainly imported from Australia and Indonesia to lower steel production costs.
- Lower import duties on scrap steel: To support small and medium-sized steel manufacturers.
- Rationalized export duties: To enhance India’s global competitiveness in steel exports.
Industry Takeaway
Lower import duties could reduce domestic steel production costs, enhancing India’s competitiveness both locally and globally. However, any export duty hikes could affect India’s global market standing.
Expansion of the Production-Linked Incentive (PLI) Scheme (Industry Expectation)
What’s Expected?
The PLI scheme for specialty steel introduced in 2021 aimed at promoting high-quality domestic steel production. The industry expects:
- Expansion of PLI coverage: Inclusion of more high-end steel categories.
- Higher incentives for domestic producers: Encouraging increased private investment.
- Export incentives: Making Indian steel more competitive internationally.
Industry Takeaway
An expanded PLI scheme could boost investment in high-grade steel production, reducing India’s reliance on imports.
Green Steel & Sustainability Initiatives (Industry Expectation)
What’s Expected?
With the growing global emphasis on decarbonization, the industry anticipates budgetary support for:
- Incentives for hydrogen-based steelmaking: Encouraging the use of green hydrogen as an alternative fuel.
- Support for electric arc furnaces (EAF) & scrap recycling: Promoting eco-friendly steel production.
- Carbon tax incentives: Encouraging low-emission steelmaking practices.
Industry Takeaway
Incentives for green steel production could accelerate India’s transition to sustainable manufacturing and align with global climate commitments.
Support for MSMEs in the Steel Sector (Industry Expectation)
What’s Expected?
MSMEs play a crucial role in the steel industry’s supply chain. Expected budget measures include:
- Easier access to credit: Lower interest rates and extended repayment terms.
- Reduced GST rates: Lowering tax rates on raw materials to ease financial strain.
- Technology adoption incentives: Support for automation and digital transformation in small-scale steel production.
Industry Takeaway
If implemented, these measures could enhance liquidity, reduce costs, and increase competitiveness for MSMEs in the steel and infrastructure sectors.
Conclusion
Even though the official release of Union Budget 2025 is not yet come, the industry professionals believe in potent policy actions as these will be playing a pivotal role in framing the future course of growth in steel and infrastructure in India. If the expected policies, i.e., increased infrastructure, import tax cuts, PLI expansion, green steel subsidies, and MSME support, are put in action, they may exert a potent stimulus on the domestic steel output and consumption.
The steel sector will be very much watching final budget announcements, not to mention the anticipation of government policy which will be (or will not) align with industry desire.
Disclaimer: The points discussed in this article are based on industry expectations and expert predictions before the Union Budget 2025 is officially presented. The actual budget announcements may differ, and this article will be updated accordingly once official details are released.
A product manager with a writer's heart, Anirban leverages his 6 years of experience to empower MSMEs in the business and technology sectors. His time at Tata nexarc honed his skills in crafting informative content tailored to MSME needs. Whether wielding words for business or developing innovative products for both Tata Nexarc and MSMEs, his passion for clear communication and a deep understanding of their challenges shine through.
