Key Takeaways:

• India’s steel sector faces a challenge due to a 40% rise in cheap imports affecting MSMEs.
• Small mills face significant drops in output, sales, layoffs, and stalled investments.
• Government initiatives focus on boosting domestic production, quality, and green steel.
• SMEs must adopt niche products, technology upgrades, collaboration, and leverage support schemes.

India’s vision of becoming a global manufacturing hub is facing a formidable challenge: the surge of cheap steel imports. While the government is promoting the Make in India campaign to bolster local manufacturing, cheap foreign mills are oversaturating the market with low-priced raw materials, undercutting domestic industry and putting pressure on the resolve of Indian steelmakers, especially MSMEs and rerollers.

Therefore, the big question is: Can Indian Steel Mills survive in a global steel price war?

Why Is India Facing a Flood of Cheap Steel Imports?

Despite government tariffs and support measures, imports continue to flood the Indian market. Imported steel often lands 7–10% cheaper than domestic products, severely impacting local margins.

Imports are especially concentrated in flat products like HRC, CRC, coated, and galvanized steels, directly competing with Indian mills. India’s steel imports rose over 40% year-on-year in FY25, reaching 8.3 MT, the highest in six years.

India’s Steel Ambition vs. Global Price War

India has had a sustained period of being the second-largest steel producer in the world, but now the industry is grappling with new obstacles related to importation, raw material constraints, and environmental targets.

This policy also emphasizes:

• A shift toward green steel production using scrap and hydrogen,
• Enhancing domestic mining for input security,
• Technological modernization of steel plants,
• Boosting export competitiveness.

Although production capacity continues to increase, so do the imports of low-cost steel, which undermines the profit margins and sustainability of mills, especially small and medium-sized Indian mills.

SME’s Suffer the Most

The ongoing import glut is creating an uneven impact on small and medium-sized enterprises (SMEs), which account for approximately 41% of the total steel produced in India, employing over 1.5 million workers. SMEs primarily operate in particular industrial clusters such as Mandi Gobindgarh in Punjab, Raipur in Chhattisgarh, Wada in Maharashtra, and Howrah in West Bengal etc. They are capital-poor, frequently behind the times in technology, and cannot respond to the enormous price competition initiated by subsidized and underpriced steel imports. The SMEs in the industry are currently in distress - their levels of capacity utilization are down 30 - 35%; they are down 30-35% in sales; they have lots of unsold inventory; they have let go of 10 - 15% of their workforce, and many critical investments in modernization have been deferred indefinitely. The larger plants, like JSW Steel and Tata Steel, have raised the alarm, but they have scale, they are export-oriented, they have more access to capital, and they have diversified products that insulate them from the shock. However, the continuing distress of the SMEs poses a systemic risk for the steel industry ecosystem, which includes supplier networks, logistics providers, ancillary industries, and MSME partners whose businesses rely on these smaller producers.

India’s Strategic Push: Replicating Imports and Building Alternatives

In response to the surge in cheap steel imports, India is proactively working to replicate imported steel products and develop domestic alternatives. This multifaceted approach aims to reduce reliance on imports and improve domestic steel products through cementing efforts and a host of collaborative internal and external actions.

Production Linked Incentive (PLI) Scheme for Specialty Steel

In July 2021, India introduced the PLI Scheme for Specialty Steel to promote domestic production of high-value grades of steel, such as:

• Automotive-grade steel
• Electrical steel
• High-strength low-alloy (HSLA) steel
  

The first phase attracted a total of 44 projects with a committed investment of ₹27,106 crore that would create 24 million tonnes of downstream capacity.  For the second phase (PLI Scheme 1.1), the programme formally began in January 2025 with relaxed conditions to further stimulate output and reduce dependence on imports.

Greenfield Steel Plant in Ludhiana

To enhance domestic production capabilities, a ₹2,500 crore greenfield special and alloy steel plant is being established in Ludhiana by Vardhman Special Steels Limited (VSSL) in partnership with Japan’s Aichi Steel Corporation. The facility, designed to produce 5 lakh tonnes of steel annually, will serve both domestic and international automotive sectors. Utilizing Electric Arc Furnace (EAF) technology, the plant aims for high energy efficiency and low carbon emissions. A separate ₹500 crore solar power plant will supply renewable energy to the project.

Steel Research and Technology Mission of India (SRTMI)

The SRTMI is a collaborative initiative between the government, academic institutions, and the steel industry to promote research and development in steel technology. The mission focuses on:

• Developing efficient steel production technologies
• Enhancing the quality of domestic steel products
• Reducing production costs
  

By fostering innovation, SRTMI aims to make Indian steel products more competitive in both domestic and international markets.

Steel Quality Control Order (QCO)

To ensure the quality of domestically produced steel and reduce the influx of substandard imports, the government has introduced the Steel Quality Control Order. This regulation prohibits the production and imports of defective and substandard steel products, which serves to promote the utilization of domestic high-quality steel in different segments across sectors, primarily construction and infrastructure.

National Steel Policy (NSP) 2017

The NSP aims to triple India's steel production by 2030, focusing on:

• Increasing per capita consumption of finished steel,
• Developing high-technology steel production capabilities,
• Supporting medium and small enterprises.
  

Additionally, the policy priorities include import substitution and aim to develop high-grade steel and alloys for strategic sectors such as defence and infrastructure.

The Role of Policy: Creating a Level Playing Field

While the burden is on Indian steel mills to adjust, we see an important role in government policy to ensure equal competition and longer-term resilience for the industrial economy.

Short-Term Measures

• Impose or increase a range of anti-dumping duties on a range of steel products.
• Impose temporary safeguard duties during global supply excess.
• Expand Quality Control Orders (QCOs) to cover further steel categories and limit low-grade imports.
  

Structural Reforms

• Extend PLI schemes and green subsidies to MSME steelmakers,
• Invest in cluster infrastructure — power, water, logistics — in steel-producing regions,
• Support the scrap collection and processing ecosystem, crucial for green steel.​

Long-Term Vision

• Promote hydrogen and renewable energy usage in smaller mills,
• Improve domestic mining of coking coal, met coke, and other inputs,
• Enhance trade defence mechanisms while respecting global obligations.

India must strike a balance between openness to global trade and protection from predatory pricing that undermines the domestic industry.

Conclusion

India’s steel sector has immense potential. Given its extensive reserves of iron ore , strong human capital, and increasing demand for both domestic and export, it has the potential to serve as the world's steel capital. But that future may be compromised if lower-priced imports undermine small and medium steel makers. The Make in India initiative is not only about large manufacturing facilities or exporters. It is about inclusive industrial growth that bolsters the inclusive nature of the value chain. Protecting and empowering SMEs is critical for not only production targets but also job and employment, innovation, and regional development.

Indian steel mills, specifically SMEs, will have to shift from reliance on competition by volume to competition by value-added differentiation, operational efficiencies, and strategic collaborations. For the domestic steel sector to thrive against global headwinds, government support, policy direction, as well as mass technology adoption will all be key levers of differentiation.