KOLKATA: Prime Minister Narendra Modi’s ‘Make in India’ programme, which has earmarked $87 billion worth of investment in new infrastructure and manufacturing projects over the next five years, will benefit the country’s steel and mining companies, a research report says. The initiative is likely to translate into meaningful steel demand after a gap of around 18 months, according to a report by research agency S&P Global Platts.
“While the growth trajectory for India’s economy and its steel sector is unarguably a positive one, patience will be required. India has routinely missed its targetsn and despite the efforts of the Modi government, limited access to land, approval delays and a lack of fundig, all remain,” Platt said in its metals special report.
Yet the potential upside is enormous, Platts said, with new investments in roads, power and railways over next five years accounting for almost 60% of the total investment. The government wants to construct 10,000 km of highways in the current financial year. One positive sign is low level of resistance to reforms taken by the government in the last 32 months.
Steelmakers are already benefiting from higher road construction activity with consumption of rebar and wire rod increasing by 8.5% to 30.14 million tonne (mt) between April 2015 and February 2016, according to Joint Plant Committee data. Similarly, Railways plans to spend $128 billion on its network in the next five years, including $17.6 billion in FY17.
Pace of building new railway lines is set to almost double from 7 km/day during FY17 to 13 km/day in FY18. Steel Authority of India — tipped to be one of the major beneficiaries of the rail network rollout — estimates an additional 118,000 tonnes of rail will be required during FY17 and 644,000 tonnes in total over the next three years.
Other domestic steelmakers could also benefit from plans for three new railway freight corridors and double track laying, which has doubled demand for steel. Demand for steel from the Smart Cities programme is harder to quantify. A report by Confederation of Real Estate Developers’ Associations of India estimated that $1.1billion have to date gone into developing the Smart Cities programme, Platts said.