Major steel companies like Tata Steel, SAIL and JSW Steel were expected to gain with Finance Minister Arun Jaitley’s announcements of higher spend on infrastructure.
The FM's announcements on infra growth are likely to generate the much-needed demand for the steel industry which is reeling under competition from imports and poor domestic demand.
Jaitley said, spend on infra would be over Rs 2.21 lakh crore during 2016-17.
Additionally, the government's focus on rural-urban is also likely to create steel demand.
The FM's budget proposals on infrastructure meet a long-standing demand from core sector industries like cement and steel. In the run-up to the Budget, Tata Steel had said the government procurement from the domestic steel sector can act as a major stimulus for demand creation.
The past one year has been one of the most difficult for the domestic steel industry.
While the government set a target of producing 300 million ton (mt) by 2030, the industry is suffering from low capacity utilisation. According to the steel ministry, production of crude steel during April - January 2015-16 has grown 0.7% to 74.49 mt, compared to the same period last year. The industry has also been facing a surge in imports which grew nearly 24.1%.
Commenting on Union Budget, Dilip Oommen, CEO & MD, Essar Steel India Limited, said: “The Union Budget clearly seeks to achieve fiscal consolidation while giving boost to the rural sector in terms of investments, employment generation and social benefits. This will strengthen long-term fiscal regime for the country. The stable tax regime reflects consistency of government policies. The emphasis on rural electrification, cooking gas connection to BPL families, infrastructure development has significant potential to drive steel demand. However, the steel industry will have a cost push on account of the increased cess on coal.”