Whalesbook
Steel Sector Pushes for Green Transition in Budget
Industry body Assocham has urged the government to introduce incentives for hydrogen-based direct reduced iron (DRI) production and offer concessional green finance in the upcoming Union Budget for Fiscal Year 2026-27. The proposals aim to accelerate the steel sector's shift toward low-carbon manufacturing processes.
Finance Minister Nirmala Sitharaman is expected to present the budget on February 1, 2025. Assocham's pre-Budget recommendations also highlight the need for incentives supporting waste-heat recovery systems and the establishment of renewable captive power plants to significantly curb emissions. The industry group views decarbonisation as both a challenge and a crucial competitive opportunity.
Boosting Recycling and Reducing Import Reliance
The chamber further advocated for incentives encouraging scrap collection and recycling. Strengthening domestic recycling infrastructure, coupled with necessary skilling initiatives, is deemed essential to diminish the country's heavy reliance on imported raw materials. This focus aims to improve the sustainability of the domestic supply chain.
Assocham noted that despite India being the world's second-largest steel producer after China and experiencing robust growth of 8-9% annually, the sector faces substantial headwinds. Persistent issues include elevated input costs for key raw materials, the depreciating rupee, and a critical dependence on imported coking coal due to scarce domestic reserves.
Strategic Vision for 'Make in India'
Adding to these challenges, iron ore production has remained stagnant, with many recently auctioned mines yet to commence operations. The combination of growing domestic steel demand and continued iron ore exports is tightening supply, driving up costs for domestic manufacturers. Assocham believes the forthcoming budget presents a critical opportunity to reinforce India's standing as a global manufacturing hub for steel and value-added products under the 'Make in India' initiative.
To achieve these ambitious goals, Assocham has called for concrete policy measures. These include promoting iron ore beneficiation, removing import duties on essential raw materials, and rationalizing royalty calculations to eliminate the burden of double taxation. The body also stressed the importance of incentivizing research and development in areas like steel recycling, alloy innovation, and process digitalization to enhance overall productivity and reduce dependency on specialty steel imports.