The steel industry in India is suffering from a clear case of dampened spirits with a huge credit crunch slowing down the demand.

The first casualty is Sajjan Jindal's huge capacity expansion plan which would have made him bigger than Tata Steel in India. As a result, the additional 3 million tonnes of steel to be rolled out from Vijayanagar in September is nowhere in sight.

"We will not start production till November end as there is no demand and if things are not better it may not start till January," said Sajjan Jindal, VC & MD, JSW Steel.

The new capacity addition is now like a white elephant with high interest cost eating into initial investment.

Sajjan Jindal will clearly have to wait longer to become the largest private steel producer in India, but at present a bigger work at hand could be to grapple with the slowing demand for steel in domestic market.

Moreover, NDTV has learnt that Indian steel majors like JSW Steel, Essar Steel and Ispat have cut production by 15-20 per cent this month to reduce supply and boost demand.

"Although demand is low, but we have not yet cut production. It could be an option the slowdown continues," said Jindal.

Though the companies are mum, the softening of steel prices by over 30 per cent in 45 days tells the story and may also indicate a further lowering of the Index for Industrial Production.