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India is the world’s second-largest producer of crude steel, after China. While China produces about 850 million tonnes (MT) annually, India produced 151.14 MT of crude steel and 145.30 MT of finished steel in FY25. During the first four months of FY26 (April–July 2025), finished steel production stood at 51.46 MT.

Current Status of India’s Steel Sector

First, India’s domestic steel demand is expected to grow by 9–10% in 2025, according to ICRA, though final data is yet to be released. As per IBEF, India aims to achieve steelmaking capacity of 300 MT per annum by 2030, which will require investments of about US$156.08 billion by 2030–31.

Second, the Indian steel sector enjoys several advantages.

These include access to low-cost manpower and abundant iron ore reserves, with the potential to mine nearly 700 MT of iron ore annually. In addition, many steel plants in India are modern and technologically advanced, with conti-nuous upgrades aimed at improving efficiency and productivity.

Third, the expanding domestic market has supported sectoral growth. In FY25, finished steel consumption reached 150.23 MT. During April–July FY26, domestic consumption stood at 51.45 MT, while production was 51.46 MT. Secondary steel producers, including MSMEs, accounted for 47% of crude steel capacity in FY25. Total steel capacity exceeded 200 MT in the same year. The National Steel Policy, 2017, envisages production capacity of 300 MT by FY31 and per capita steel consumption of 160 kg.

Challenges facing the Indian Steel Industry

First, per capita steel consumption in India remains significantly below the global average. In 2023, India’s per capita consumption was 93.44 kg, compared with the global average of around 230 kg. While this indicates strong potential for market expansion, it also reflects uneven economic development. Rural consumption remains disproportionately low, and weak purchasing power among large sections of the population constrains demand. Unless growth becomes more broad-based and inclusive, per capita steel consumption is unlikely to approach global levels, creating a structural bottleneck for the industry.

Second, export prospects for Indian steel are limited by low competitiveness. The European Union’s Carbon Border Adjustment Mechanism (CBAM), effective from 2026, could add approximately US$ 80.39 per tonne to Indian steel exports, further eroding competitiveness. Heavy exposure to European markets necessitates rapid investment in decarbonisation technologies such as hydrogen-based DRI, renewable power integration, and carbon capture, imposing significant financial burdens, particularly on mid-sized exporters.

Third, volatility in raw material prices and high energy costs pose serious disadvantages. Energy costs account for an estimated 20–40% of operating expenditure in Indian steel plants. Electricity tariffs of ₹7–₹9 per unit in states such as Maharashtra, Gujarat, and Tamil Nadu are among the highest globally. Moreover, many plants remain inefficient, consuming 6–6.5 gigacalories per tonne of crude steel, compared with global best practices of 4–4.5 gigacalories.

Fourth, the sector faces persistent threats from substitute materials and services, which discourages fresh investment.

Fifth, dumping of steel by global producers, particularly from China and Korea, continues to exert downward pressure on domestic prices. Even when volumes are not excessively high, underpriced imports reduce the profitability of domestic producers.

Sixth, the industry remains heavily dependent on imported coal, which attracts duties of 2.5% on coking coal and 5% on coke, creating a cost disadvantage of US$ 5–7 per tonne.

Environmental Concerns

A report by ICRA dated 20 January 2026 noted that the carbon intensity of India’s steel industry is about 12% higher than the global average. This is likely to persist in the medium term, as most planned capacity additions rely on the blast furnace route. At around 2.5 tonnes of CO₂ emissions per tonne of steel, Indian producers face growing challenges, particularly in exporting to markets such as the European Union, where carbon compliance standards are tightening.

Way Forward

India is the world’s second-largest steel producer, and output is expected to rise further as the economy grows and population expands. However, without more inclusive economic growth and structural reforms, ambitious production targets may remain unmet. At the same time, addressing cost disadvantages, energy inefficiencies, environmental challenges, and global competitiveness will be essential for the long-term sustainability of India’s steel industry. Do you like this personality?