A Standard & Poor's report has said that reviving demand, and not protective duties, is the most important driver of profitability of the domestic steel industry over the next three to five years, media reported.
Commenting on the issue, Standard & Poor's Credit Analyst Mehul Sukkawala told the media, "Demand revival and not safeguard duties will determine the profitability and development of the steel industry over the next three to five years here."
"The last week's 20 per cent safeguard duty imposed on hot-rolled coil imports can eventually damage the economy by curbing competitiveness of its manufacturing sector, which consumes steel, and by increasing the cost of building infrastructure," he added.
The report further said that the steel consumption could increase by 9-10 per cent in next fiscal year and FY18, if economic growth accelerated, compared with 1-4 per cent growth since FY13. This could help absorb oversupply and improve profitability.
The rating agency also added that the latest 20 per cent safeguard tax on HR coil imports from China for the next 200 days would only protect the industry for a limited time.