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India needs a steel policy that protects domestic manufacturing without allowing excessive pricing distortions in the domestic market.
Written By AS MITTAL | THE NEWS DOSE.COM
New Delhi/Chandigarh, Updated At: 11.50AM May 21,2026IST
Walk through any infrastructure project or steel-consuming industrial cluster in the country today, and one concern echoes across construction sites and industrial sheds: input costs are pinching as steel has become sharply more expensive, rising faster than underlying input costs.
India’s benchmark hot-rolled coil (HRC) prices, which slipped to nearly Rs 46,000–47,000 per tonne in early 2025, have surged to nearly Rs 56,000–60,000 per tonne. Cold-rolled coil (CRC) prices are assessed at Rs 60,000–67,000 per tonne. TMT bars are priced at Rs 50,000–65,000 per tonne across major markets during March–April 2026. That represents an increase of roughly 20–28 per cent in just over a year. Yet the rise in core raw-material costs has been more moderate. It reflects a deeper structural issue in India’s steel economy.
Policy protection
The principal driver of this divergence is not purely market dynamics but policy design. In April 2025, India imposed a provisional 12 per cent safeguard duty on select flat-steel imports after a surge in cheaper shipments from China and other Asian producers. Later, the Directorate General of Trade Remedies (DGTR) recommended a phased three-year safeguard structure: 12 per cent in the first year, tapering gradually. The intent was understandable and largely justified.
Imports had surged sharply, particularly from China, placing immense pressure on domestic mills. Indian steelmakers argued that heavily subsidised overseas steel was eroding domestic profitability and discouraging long-term investment in capacity expansion. The safeguard duty was therefore framed as a defensive industrial policy measure rather than outright protectionism.
The policy achieved its immediate objective. Imports moderated, domestic producers regained pricing power, and steel company stocks rallied. But protecting the domestic industry and enabling unchecked pricing are not the same.
With import competition curtailed, India’s large integrated steel producers faced less external pressure to moderate prices. Domestic steel spreads expanded sharply during late 2025 and early 2026. This suggests much of the recent price rise reflects margin expansion rather than simple cost pass-through.
The expanding spreads were also reflected in the profit earnings of major steelmakers. During the last quarter of FY2025–26, leading producers reported a sharp rise in profitability, driven by higher domestic steel prices that boosted realisations and operating margins. JSW Steel reported a record 1282% year-on-year increase in its consolidated net profit for the fourth quarter of FY 2025-2026, rising to Rs 19,243 crore from Rs 1501 crore in the same quarter last year.
Tata Steel’s India business witnessed a strong recovery in margins, with consolidated net profit in Q4FY26 rising nearly 125% to Rs 2926 crore from Rs 1301 crore in the year-ago period. Steel Authority of India Ltd (SAIL) also reported a significant improvement in earnings, with FY 26 last-quarter profit of Rs 1836 crore, a 46.7% increase compared to the Rs 1251 crore reported in the same quarter of the previous year.
Demand has intensified the pressure.
Strong domestic demand has amplified the problem. India’s steel consumption continues to rise rapidly, driven by a massive public infrastructure push, urbanisation, railway expansion, housing construction, and manufacturing growth. Government capital expenditure has remained high. Private investment in logistics, warehousing, renewable energy, and industrial parks has also accelerated.
The construction and infrastructure sectors account for most of India’s steel demand. When public and private capex cycles rise simultaneously, demand tightens quickly. Although India’s installed steelmaking capacity has expanded significantly, usable supply does not respond overnight. Capacity utilisation, maintenance cycles, logistics bottlenecks, and product mix constraints limit immediate flexibility. In other words, the market was already tightening before safeguard duties strengthened domestic pricing power.
Freight and geopolitical factors
India imports nearly 85–90 per cent of its metallurgical coal requirements, largely from Australia. Benchmark Australian hard coking coal prices climbed sharply in early 2026 after weather disruptions, particularly Queensland flooding, tightened global supply. Freight costs also rose amid geopolitical tensions in West Asia (the US-Israel-Iran conflict) and concerns about shipping routes and marine insurance. This increase in delivered raw-material costs for Indian mills persisted even as benchmark mine-mouth coal prices remained relatively stable over the broader fiscal year. Some increase in domestic steel prices was therefore inevitable. However, the magnitude of the final price rise is substantially larger than the increase in underlying production and logistics costs. Freight inflation and volatility in imported coal alone cannot explain a sustained 20–28 per cent jump in finished steel prices.
Structural problem: Concentrated market power
A handful of large players dominate India’s flat-steel industry. In a concentrated market, safeguard duties can unintentionally create conditions where producers gain substantial pricing leverage, especially when demand is robust.
Downstream industries such as automobiles, engineering goods, consumer durables, auto components, fabrication, and construction bear the burden. Small and medium enterprises are especially vulnerable because they lack bargaining power and cannot easily pass higher input costs to consumers. This is where the current policy architecture is incomplete. India’s safeguard duty framework protects producers from import shocks but has no effective mechanism to protect downstream consumers from excessive domestic pricing.
A smarter safeguard framework
The answer is not to withdraw safeguard protection abruptly. Doing so could expose domestic manufacturers to aggressive dumping, undermine investment sentiment, and weaken India’s long-term industrial ambitions.
But protection should come with accountability. India needs a calibrated safeguard framework linked to domestic price behaviour. One option is a price-trigger mechanism that partially relaxes safeguard duties if domestic HRC prices breach a predefined benchmark for a sustained period. This would allow limited imports to re-enter the market temporarily and restore competitive discipline.
Once domestic prices stabilise, the full safeguard structure could automatically resume. Several major economies, including the European Union and Brazil, have experimented with variations of calibrated trade-defence mechanisms linked to market conditions. India can adapt similar principles to balance producer protection with consumer interest.
Simultaneously, the government must accelerate efforts to reduce dependence on imported coking coal. Expanding domestic coal beneficiation, securing overseas mining assets, improving rail logistics, and advancing Mission Coking Coal are essential for long-term resilience.
Way forward
India’s steel price surge is not just about rising demand or volatile commodity markets. It results from three forces colliding simultaneously: safeguard-driven protection, strong domestic demand, and monopolistic pricing power. Earlier makers were grappling with weak margins, subdued domestic prices, and a flood of cheaper imports. Today, the pendulum has swung sharply in the opposite direction. Producers have regained pricing power, but downstream industries from MSMEs and auto-component makers to builders and infrastructure contractors are paying the price.
The industrial policy cannot become a one-sided transfer of pricing power from consumers to producers. Steel is the backbone of India’s infrastructure, manufacturing, housing and mobility. When steel prices rise disproportionately, the effects ripple across the entire economy, from highways and housing projects to consumer goods, engineering industries and farm mechanisation.
