Way forward for the Indian Steel Industry
"We still have a number of persons in our
country in SAIL, TISCO and other big and small steel plants who have the capabilities.
They have the will to excel and transform the country, given a long term vision."
"We should be ready to compete in outside markets…..If our steel
industry gears up in about 3 to 4 years, Indian steel can be both in Indian and foreign
markets. Our vision should be towards this."
- Indian 2020: A vision for the new millennium by APJ Adbul Kalam and
YS Rajan |
The Government envisions India becoming a developed
nation by 2020 with a per capita GDP of $1540. For a nation that is economically strong,
free of the problems of underdevelopment and plays a meaningful role in the world as
befits a nation of over one billion people, the groundwork would have to begin right now.
The Indian Steel Industry will be required and is willing to play a critical role in
achieving this target.
With abundant iron ore resources and well-established base for steel
production in the country, steel is poised for growth in the coming decades. Production
has increased from 17 MT in 1990 to 36 MT in 2003 and 66 MT is targeted for 2011. While
steel will continue to have a stronghold in traditional sectors such as construction,
housing, ground transportation, special steels will be increasingly used in hi-tech
engineering industries such as power generation, petrochemicals, fertilisers etc. Steel
will continue to be the most popular, versatile and dominant material for wide ranging
applications. While India may not become a leader in world steel market, it can become a
powerful force.
To help the Indian Steel Industry achieve its potential and play a
meaningful role in India’s development some steps need to be taken
| • |
Steel is yet to touch the lives of millions of people
in India. Per capita consumption of steel in India is only 29 kg and has to go a long way
to reach consumption levels of around 400 kg in developed countries like USA and world
average of 140 kg. |
| • |
There is a need to continue the current thrust on
infrastructure related activities and extend them to rural India. Rural Indian today
presents a challenge for development of the country and the opportunity to increase usage
of steel in these areas through projects such as rural housing etc. |
| • |
Current shortage of inputs has pushed up the costs for
the steel industry. Government should ensure that quality raw material such iron-ore and
coke are available to the industry. With Ministry of Steel targeting an output of 100 MT
of steel by 2020 there is an urgent need to develop raw material resources for inputs like
iron-ore and coal within or outside the country. Countries like Japan have already taken
similar steps to safeguard their industries. |
| • |
Adequate enabling infrastructure such as power, ports,
roads, rail transport is pre-requisite for the Indian steel industry to remain
competitive. |
| • |
Government should not regulate prices and free market
forces should prevail. Intervention by the Government is only a short-term solution to the
issue of steel prices in the country. Once left alone, market dynamics will automatically
ensure price corrections and determine the optimum price of steel. |
| • |
The Indian steel Industry is amongst the least
protected in the world. While developed countries have put numerous tariff and non-tariff
barriers on steel exports from the country, the domestic industry is exposed to cheaper
imports from competing nations. As in case of other important industries, the Government
should give reasonable levels of protection to the domestic steel industry, which is just
starting to get back on its feet. |
| • |
Industry should be allowed to have a fair return on
investment and contribute to the overall health of the Indian manufacturing segment. The
steel industry has invested a capital of over Rs 90, 000 crores. CRISIL in a recent study
has concluded that given the large exposure that banks and financial institutions have to
the steel industry, a healthy steel sector is in the interest of the economy. Steel
industry still continues to be unattractive for investors and a recent study by CRIS INFAC
suggests that any new projects with target price below $270/MT will be economically
unattractive. |
| • |
Today, Indian producers employ world-class standards of
technology. Steel from Indian finds growing acceptability in international markets. But
despite this India’s share in world trade steel is a miniscule 2%. Given the
capabilities of the Indian steel industry there is tremendous scope to increase this share
further. While the steel industry will continue servicing the domestic demand there is a
lot of untapped export potential with the industry. The Government, in line with EXIM
policy 2002-07, should take steps to make Indian exports more competitive. |
China’s soaring demand (over the past five years China’s
demand for flat steel has risen at 17 percent as compared with just 2 percent for the rest
of the world: the growth rate in China’s demand for steel is expected to come down to
8 percent during 2003 through 2010) which had revived the long term suffering industry
will eventually be satisfied by additional domestic capacity-hardly a long term solution
to the fundamental problem of worldwide capacity. The basis for such a conclusion is the
estimated lower cost of construction of steel mills in China by some 30 to 50 percent than
comparable facilities in the developed world and the fact that currently the global flat
steel industry has at least 100 million tons of overcapacity. Add to this the worry of
economists of slower economic growth in China and the fact that the country can become a
net exporter with telling effects on future international prices. Adequate steps must be
taken right now to make the Indian steel industry more competitive in order to meet these
challenges. The Indian steel industry may not be able to afford another crisis similar to
he one between 1997-2001. |
