India’s Steel Production & Industry

In 2009, India produced 56.6 mmt of Steel. The Production of Steel in India has remained almost static since 2004. It’s worth note that in India, the Finished Steel Production during the 1950-51 was only 1 million metric ton. The progress made by India’s steel sector is shown in the following table.

Year

Finished Steel

1950-51

1.0

1980-81

6.8

1990-91

9.6

2000-01

30.3

2007-08

55.1

2008-09

56.6

In MMT

This shows a satisfactory growth in the steel production of the country. India became a Net Exporter of Steel in 2006-07, when for the first time Export of Steel surpassed the import of steel.

The reasons for this growth were as follows:

  1. India became self sufficient in setting up of new steel plants. After the three plants set up with Foreign Technical and Economic Assistance, India could set up the fourth public sector plant i.e. Bokaro Steel Plant on its own.
  2. The Mini Steel plants emerged as India gave licenses to set up electric arc furnace units. These mini steel plants account for one third of steel production in the country. In India there are around 650 Mini Steel Plants.
  3. The series of reforms in the Iron and Steel Industry was helpful to provide a Boost to the industry. These reforms included:
  • Liberalization of export and import of steel
  • Abolishment of price and distribution control.
  • Reduction in import duties of Iron Ore.
  • India has home based large sources of Iron Ore so, it was used to increase the production of steel.

However, India has slipped two positions in 2010 to become the world’s fifth-largest steel producer. India produced 66.8 million tons of steel last year, 6.4% more than 2009, but was well outpaced by the growth in other parts of the world. Global steel production during the year grew by 15% to 1,414 mtpa, only the second time in a year when it has grown in double digits and rebounding from the decline witnessed in 2008 and 2009.

Structure of Steel Industry in India:

The iron and steel industry in India is organized in three categories’ viz. main producers, other major producers and the secondary producers. In 2004-05, the main producers i.e. SAIL, TISCO and RINL had a combined capacity of around 50% of India’s Total Steel Production Capacity and Production. The other major producers comprising of ESSAR, ISPAT and JVSL account for around 20% of the Total Steel production Capacity. The secondary sector is dispersed and consists of:

  1. Backward linkage from about 120 sponge iron producers that use iron ore and non-coking coal.
  2. About 650 mini blast furnaces, electric arc furnaces, induction furnaces and energy optimizing furnaces that use iron ore, sponge iron and melting scrap to produce steel.

India’s Iron & Steel Industry: SWOT Analysis

  1. Availability of iron ore and coal in the country
  2. Low labour wage rates
  3. Abundance of quality manpower
  4. Mature production base
  5. Supportive Government Polices.

Weaknesses

  1. Unscientific mining
  2. Low productivity
  3. Coking coal import dependence
  4. Low R&D investments
  5. High cost of debt
  6. Inadequate infrastructure

Opportunities:

  1. Unexplored rural market
  2. Growing domestic demand
  3. Exports
  4. Consolidation

Threats

  1. China becoming net exporter, so threat in export market
  2. Protectionism in the West hinders the Growth of exports
  3. Dumping by competitors.

Per Capita Consumption of Steel in India:

The present per capita consumption in the country is only around 47 kg (2008) against the world average of 190 kg and that of 400 kg in developed countries, a study has been commissioned through the Joint Plant Commission (JPC) during the 2008, to estimate the per capita demand for iron and steel in the rural sector of India and to determine the factors those can contribute to its enhancement.

Containing Exports of Iron Ore

In India there is an export duty imposed on iron ore, so that it hinders the export of Iron which can be used for Steel production. Initially in 2007, an export duty of ` 50/- per ton was imposed on iron ore fines up to 62% Fe content and Rs.300/-per ton on all other varieties of iron ore. Subsequently, export duty was revised to 15% ad-valorem on all varieties of iron ore and thereafter to Nil export duty on iron ore fines and 5% ad-valorem export duty on iron ore lumps. The present rates of duty on iron ore exports w.e.f. 24.12.2009 are following:

  1. Iron ore fines (all sorts) – 5% ad-valorem
  2. Iron ore other than fines(including lumps & pellets) – 10% ad-valorem

National Steel Policy – 2005

National Steel Policy – 2005 has the long term goal of having a modern and efficient steel industry of world standards in India. The focus is to achieve global competitiveness not only in terms of cost, quality and product-mix but also in terms of global benchmarks of efficiency and productivity.

  • The Policy aims to achieve over 100 MMT of Steel per year by 2019-20.
  • This implies an annual growth of around 7.3% per year since 2004-5.

Is this aim Justifiable?

The above strategic goal is justified on the ground that steel consumption in the world, around 1000 mmt in 2004, is expected to grow at 3.0 percent per annum to reach 1,395 mmt in 2015, compared to 2 percent per annum in the past fifteen years. China will continue to have a dominant share of the world steel demand. At home, the Indian growth rate of steel production over the past fifteen years was 7.0 percent per annum. The projected growth rate of 7.3 percent per annum in India compares well with the projected national income growth rate of 7-8 percent per annum, given an income elasticity of steel consumption of around 1. ( this is what Policy Document says)

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