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What prompted Tata Steel to rejoin Indian Steel Association a year after its hasty exit?

Tata Steel had exited the association after differences with other steelmakers on a contentious mines issue. Does it mean that all are on the same page now?

April 09, 2021 / 11:54 AM IST
Editorial credit: ArnavIG / Shutterstock.com

Editorial credit: ArnavIG / Shutterstock.com

 
 
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Nearly a year after Tata Steel made a bitter exit from the Indian Steel Association (ISA), and its MD & Global CEO TV Narendran stepped down as the industry body’s president, there has been a reconciliation of sorts.

In an announcement on April 8, the ISA said that Tata Steel and its two units -- Tata Steel BSL Ltd and Tata Steel Long Products – have 're-entered' its fold. Bhushan Power & Steel, which was recently acquired by JSW Steel, has also become a member of the ISA.

The official announcement didn't give any reason to the change in Tata Steel's stance. The present ISA president Dilip Oommen, also the CEO of ArcelorMittal Nippon Steel India, said that the association is “pleased” that the members are “back with us”.

“This association, over the years, has played a pivotal role in addressing and resolving critical issues that impact our industry, and we are confident of building our collective voice and going from strength to strength,” he said.

It was a critical issue and it was the difference of opinion over it that prompted Narendran to step down last year, just a few months before he completed his tenure.  It was probably the first time in the history of the association that a sitting president was stepping down.

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It had all boiled down to one question: What should be the association’s response to the government’s plan to advance the termination of captive mine leases to 2025 from 2030?

Tata Steel was against advancing the termination. On the other hand, the rest of the members, including JSW Steel, were for it, sources had told Moneycontrol. Public sector company, SAIL, is also part of the ISA.

To know more on why the issue had become such a contentious issue, read: Critical question for Tata Steel in Indian Steel Association's change of guard

So, does it mean that all members, including Tata Steel and JSW Steel, now agree on the mines issue? May not be.

Friends in good times

It is not yet clear who has had a change in mind, Tata Steel, or the rest of its peers in the industry. In fact, all of them coming together may not be about the mines issue at all. “It may even be out of the purview of ISA,” said a senior executive from the industry.

Instead, it is the good times that has brought unity back in the industry.

Nearly all steelmakers have benefited from the increase in demand, and subsequent price hikes. Most of them have also reported better, or record, production and sales numbers in the just concluded fourth quarter of the last financial year. Stocks of JSW Steel, Tata Steel and SAIL have repeatedly hit 52-week highs in the last fortnight.

There is room for more hikes, and this will further help steel companies recover losses from last year's lockdown, and improve margins. Most importantly, all have debts to repay.

But the price hikes, which have continued since June 2020, has also evoked protest and criticism from the user industry. Union Minister Nitin Gadkari has been vocal about it and alleged that the industry has created a cartel. Subsequently, the Competition Commission of India began a probe too. 

It is, perhaps, to face this probe and criticism that the steel industry has come together now. “Tata Steel joining the ISA will benefit both, as all have to be united. There is pressure from clients and government,” said an official from the industry who has been following the developments.

That is not all. The government, too, another source from the industry said, had wanted everyone to come together, and the Ministry of Steel pushed for Tata Steel to come back. “Dilip Oommen too played a role,” said one of the executives quoted above.

So, does it mean that it’s all peaceful again in the steel industry? “They will stay together as long as there is no deep conflict,” said the executive. The bonhomie will be tested when the mines issue comes up again on the table.

For now, the family wants to protect its turf.
Prince Mathews Thomas heads the corporate bureau of Moneycontrol. He has been covering the business world for 16 years, having worked in The Hindu Business Line, Forbes India, Dow Jones Newswires, The Economic Times, Business Standard and The Week. A Chevening scholar, Prince has also authored The Consolidators, a book on second generation entrepreneurs.
first published: Apr 9, 2021 11:54 am

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