As global trade wars proliferate and economic environment becomes unpredictable, there is demand to protect the vulnerable sectors of Indian economy from Chinese dumping especially in steel.

India has consistently protected its upstream steel industry to ensure economic sovereignty, using tariffs and regulatory shields. The 2025 safeguard duties against Chinese dumping continue this approach.

However, rising steel costs strain downstream sectors like engineering, construction, and auto-components, risking competitiveness. Given this context, let us decode consequences of such protection and the way forward for India’s steel sector.

Shielded to scale

Since independence, and more specifically in last decade, India has systematically implemented a multi-pronged strategy to protect the steel sector, blending industrial, trade, tariff, and non-tariff measures.

For instance, industrially, the National Steel Policy, 2017, set an ambitious target to expand crude steel production capacity to 300 million tonnes (mt) by 2030-31, aiming to position India as a global steel manufacturing hub.

The 2021 PLI Scheme for Specialty Steel allocated ₹6,322 crore to boost domestic production by 25 mt and cut imports.

Similarly, Mission Purvodaya (2020) was aimed to revitalise Eastern India’s steel ecosystem. Infrastructure initiatives like Make-in-India, and the National Infrastructure Pipeline also aim to stimulate domestic steel demand.

On the trade front, India took decisive measures to shield its steel sector from global oversupply, particularly from China, Japan, and South Korea. In 2016, it introduced a Minimum Import Price (MIP) across 173 steel products to counter plummeting global prices. When MIP expired, India shifted to more targeted trade monitoring through the Steel Import Monitoring System (SIMS), introduced in 2019, requiring advance registration of steel imports.

Tariff instruments also played a critical role, albeit sometimes at the cost of downstream industries. In 2018 and 2020, India raised basic customs duties on various steel products to 15 per cent. Since 2015, India has imposed anti-dumping duties on imports from countries like China, South Korea, and Japan, and applied countervailing duties on Chinese steel in 2017. In 2024-25, policymakers once again introduced safeguard measures to protect the upstream steel sector from unfair competition.

In the non-tariff domain, policymakers introduced mandatory BIS certification for steel products in 2016, limiting the influx of substandard imports and later increasing their scope under Make-in-India mission.

Correspondingly the introduction of Quality Control Orders (QCOs), expanding coverage to over 100 steel categories, ensured higher product quality standards. Restrictions on defective and seconds steel further closed avenues for cheap imports.

India’s vigilance also extended to controlling third-country rerouting through the UAE, addressing the misuse of FTA provisions via COO rules from ASEAN countries, and introducing CAROTAR-2020, all of which complemented the protective measures to safeguard the upstream steel industry.

Downstream distress

However, downstream industries like auto components, aerospace, defence, and heavy engineering faced higher costs and reduced competitiveness, constraining India’s value-added export growth amid rising protectionism.

Despite India’s robust base in basic carbon and mild steels, domestic availability of niche, high-performance categories like high-strength alloy (crankshaft), heat-resistant wear steels (piston rings), super-alloy extreme (jet-engine turbine blades), marine and cryogenic steels (submarine pressure hulls), weathering and corrosion steels (shipping containers), impact-resistant transit steels (railway wheels) and austenitic and martensitic Stainless Steel (medical needles, forceps, scissors, blades etc) is markedly scarce.

Auto component makers producing gudgeon pins, piston rings, crankshafts, and sleeves often rely on imported alloy steels like 4340 and nitrided tool steels, as indigenous alternatives frequently fall short on fatigue endurance and metallurgical finesse.

In defence manufacturing, India’s ambitions to export tanks and armoured vehicles are hamstrung by the lack of high-grade armour steels (for tank turrets) and HY-series steels crucial for submarine construction.

Even when available, the steel often becomes economically unviable; for instance, while India exports 100cc bikes at around $950, China does so at a leaner $650, exposing a structural competitiveness chasm.

Similarly, we are priced-out in ship building. In aerospace, the constraints are even more acute: Inconel-based superalloys vital for aeroplane wings, jet engines, and gas turbines continue to be heavily imported, stalling India’s aspirations in global defence exports.

Renewable energy sectors, particularly windmills, suffer similarly due to the limited supply of ultra-high tensile steels, while railways struggle with precision-grade manganese alloy steels for wheels enduring dynamic loads.

Heavy machinery and oil drilling industries also import hardened tool steels for equipment like drilling machines and gantry cranes. This specialty steel deficit not only escalates costs but systematically undermines India’s rise in engineering exports. A strategic reforms in specialty steel production is imperative to truly transform India’s manufacturing narrative.

Way forward

The proposed National Manufacturing Mission (NMM), replacing the PLI incentives, aims to raise India’s manufacturing share to 25 per cent of GDP and create 100 million jobs. Recognising steel as a critical scale industry essential for industrial competitiveness, the NMM must address both upstream and downstream segments to build a resilient and vibrant India, one that is free from dumping, import dependency, and equipped to drive other sectors forward in an evolving, turbulent global environment.

Our steel sector must become fundamentally export-competitive; hence, achieving scale, strengthening systems, enhancing sophistication, and promoting inter-sectoral synergies are crucial.Moreover, sector-specific interventions are essential: while large enterprises (>20 MTPA) must be fostered for BF-BOF production, a systematic push for efficient EAF and DRI routes is equally needed for MSMEs, ensuring access to low-cost, green energy sources such as small modular reactors, solar, and hydrogen.

Policy support for uninterrupted and cost-effective coal supply to large-scale industries is also necessary.

For true resilience, both scale and value-chain sophistication are critical. Strategic FDI through select foreign players can catalyse growth while countering oligopolistic tendencies.

Within 5-8 years, India’s steel sector must be free from anti-competitive practices, supported by world-class infrastructure, technological dynamism, and a fair, competitive environment. NMM’s support must be time-bound, merit-based, and transition towards an open, innovation-driven market economy.

The writer is Professor and head, IIFT, New Delhi. Views are personal

Published on April 25, 2025

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