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Why the Steel Sector Matters in Union Budget 2026
Steel is not just another industrial commodity. It is the backbone of roads, railways, housing, renewable energy projects, defence manufacturing, and urban infrastructure. Every rupee spent on infrastructure has a multiplier effect on steel demand.
India currently aims to reach 300 million tonnes of steel capacity by 2030. Achieving this target requires supportive fiscal policy, stable raw material access, and incentives for sustainable production.
Union Budget 2026 will indicate whether the government is ready to balance rapid capacity growth with environmental responsibility.
Green Steel and Decarbonization Take Centre Stage
Fiscal Support for Low Carbon Steel
The transition to green steel is no longer optional. Major steel producers are actively exploring hydrogen-based Direct Reduced Iron technologies to reduce carbon emissions. However, green steel comes at a higher cost compared to conventional production.
Industry bodies are seeking fiscal incentives such as tax benefits, viability gap funding, and concessional green financing to offset this green premium. Budgetary support in this area would not only aid domestic players but also position India competitively in global low-carbon supply chains.
Promoting Scrap Usage
India’s scrap consumption remains relatively low compared to developed markets. Increasing scrap usage can significantly reduce emissions and energy costs.
The Indian Steel Association has proposed extending the GST reverse charge mechanism across the entire metal scrap supply chain. This would simplify compliance, reduce tax leakages, and encourage formalisation of scrap sourcing.
If implemented, this move could improve margins for secondary steel producers while supporting sustainability goals.
Mandatory Green Steel Procurement
There are growing calls to mandate at least 20 percent green steel usage in government infrastructure projects. Such a move would create assured demand and encourage steel companies to invest in cleaner technologies with confidence.
Raw Material Security and Duty Rationalization
Import Duties on Critical Inputs
Coking coal and ferro-nickel account for a significant portion of steel production costs, especially for high-grade steel. Volatility in global commodity prices has often squeezed margins.
The industry expects Union Budget 2026 to review or reduce import duties on these critical raw materials. Duty rationalization could help stabilize costs and improve competitiveness, particularly for export-oriented steel makers.
Iron Ore Beneficiation Push
India has an estimated 300 million tonnes of low-grade iron ore that remains underutilized. Mining companies have been urging the government to introduce a time-bound incentive framework for beneficiation.
Encouraging beneficiation would reduce import dependence, improve resource efficiency, and support long-term raw material security for steel plants.
Royalty Rationalization
Another long-standing concern is the issue of double taxation in mining royalties. Rationalizing royalty calculations could improve project viability and attract fresh investments into captive mining and capacity expansion.
Trade Protection and the Make in India Agenda
Safeguarding Against Cheap Imports
Global steel markets have seen aggressive exports from countries like China, often at prices that distort fair competition. Indian producers are wary of the domestic market becoming a dumping ground.
The steel industry expects stricter quality control orders, stronger enforcement, and potentially higher Basic Customs Duties on select products to protect domestic manufacturers.
Such measures can provide pricing stability and protect capacity utilization levels.
PLI Scheme Expansion
The Production Linked Incentive scheme for specialty steel has already encouraged investment in high-end grades used in defence, automobiles, and renewable energy.
There is optimism that Union Budget 2026 could announce an expanded outlay under PLI, further reducing India’s reliance on imports of value-added steel products.
