Whalesbook
The Competition Commission of India (CCI) has initiated a significant investigation into 28 leading steel manufacturers, encompassing both public and private entities. The commission accuses these firms of engaging in price collusion and deliberately curbing output. This inquiry is based on a confidential interim probe report, drafted in October and leaked, suggesting manipulation occurred between 2015 and 2023.
As a result, the accused companies are required to submit eight years of audited financial statements. This action targets alleged anticompetitive behavior within a sector already subject to considerable government protection.
Steel producers in India have long benefited from import protection. The government has enforced Quality Control Orders (QCOs) on numerous steel products, particularly from China and Southeast Asia, alongside recently introduced safeguard duties. While these measures aim to shield domestic industry and support initiatives like the Production Linked Incentive (PLI) scheme for high-grade steel, they have demonstrably impacted downstream users. Many of these users, especially Micro, Small, and Medium Enterprises (MSMEs), report difficulties in sourcing steel necessary for precision engineering and advanced sectors such as aerospace.
The government's rationale for protection includes anticipating supply diversions due to tariffs in the US and EU and bolstering domestic production capacity. However, excessive protection coupled with a lack of robust competition can stifle innovation and limit output. The CCI's investigation is therefore crucial for ensuring market integrity. Concerns that domestic prices might plummet are considered exaggerated, given India's robust economic growth and infrastructure demands, barring temporary oversupply scenarios. Despite rising global steel exports from China and lacklustre international prices, Indian steel imports constitute a small portion of domestic output and largely consist of specialized products. Analysts suggest the industry's financial health is sound, with healthy operating margins projected for FY26, indicating it is not in a crisis state that would necessitate unchecked protectionism. A zero-tolerance policy towards proven price collusion is essential, and the CCI must be empowered to enforce penalties decisively.