Indian Steel Industry

2011
Indian Steel Industry

Submitted By - Group 13

Akhil Jain
Nikhil Srivastava
Shibi Singh Gaharwar
Akshay Rathod
Ankit Aggarwal
Himanshu Sirohi

Indian Steel Industry 2011

Contents
1. Industry Perspective: ................................................................................................................................ 3
1.1 Size of Industry ..................................................................................................................................... 3
1.2 Employment: ...................................................................................................................................... 4
1.3 Growth over the years ........................................................................................................................ 4
1.4 Acquisition over the years .................................................................................................................. 5
1.5 Major Players in the Industry ............................................................................................................. 5
1.6 Foreign Player in Indian market: ...................................................................................................... 6
1.7 Commodity prices of Steel movement: .............................................................................................. 7
1.8 Dumping: ............................................................................................................................................ 7
2. Macro-Economic variables affecting the industry ................................................................................. 8
2.1 GDP/Economic Growth: .................................................................................................................... 8
2.2 Inflation: ........................................................................................................................................... 10
2.3 Government Policies/Liberalization: ................................................................................................13
2.4 Environmental Concerns: ................................................................................................................ 18
2.5 Availability of raw materials: ........................................................................................................... 18
2.6 Flow of money and tax measures : .................................................................................................. 22
2.7 Growth of complementary Sectors:-................................................................................................ 24
2.8 Labour skilfulness and availability:- ................................................................................................26
2.9 FDI/FII in Indian steel industry:......................................................................................................28
3. SWOT Analysis of Indian Steel Industry:...............................................................................................31
4. Future Prospect ...................................................................................................................................... 32
4.1 Steel Demand in Rural Markets: ...................................................................................................... 32
4.2 Exports Opportunities: .................................................................................................................... 34
4.2 Development of New Technology: .................................................................................................. 36
5. Conclusions: ........................................................................................................................................... 39
6. References:- ........................................................................................................................................... 40

2


1. Industry Perspective:

India's Steel Industry has a history of more than a century. Before the
liberalization, the Indian steel industry was a predominantly synchronized one
with the public sector industry. Tata Steel was the only major private player
involved in the production of steel. SAIL and Tata Steel have been the major steel
industries of India. The liberalization of the India economy directed to the opening
up of many steel industries, consequently, increased production capacity. Since
1990, a huge investment has been made into the industry.

From 1997 to 2001 when the overall global steel industry was facing a
depression, Indian Steel Industry also went through a rough phase but improved
after 2002. India has now emerged as one of the largest producers of steel in the
entire world. Almost all varieties of steel are now being produced in the country.
India has also emerged as a net exporter of steel and Indian steel is being
increasingly accepted in the global market.

1.1 Size of Industry

PSU Net worth(31.03.2005) Net worth(31.12.2010)

SAIL 10011.00 36115.00

RINL 6878.00 13266.00

NMDC 2568.77 18601.00

MOIL 257.26 2011.19

MSTC 154.96 450.00

KIOCL 1846.69 1960.84

MECON (-) 234.76 173.23

3


1.2 Employment:

The total employment in the industry is more than two million (including
direct and indirect employment). Most of the Steel plants are situated in
economically backward regions of the country. Therefore, Steel companies have
contributed to the overall development of civic, medical, educational and other
facilities in these regions.

Since non-executives recruitments are carried out mainly on regional level,
a large number of SCs/STs and other weaker section of the society get the benefit
of employment in SAIL. For jobs of temporary & intermittent nature, generally
contractors deploy workmen from the local areas, which again provide an
opportunity for employment of local candidates of economically weaker section.

Establishment of steel plants in economically backward areas has given a fillip to
the economic activities thus benefiting the support population providing different
types of services. Over the years, a large group of ancillary industries has also
developed in the vicinity of Steel Plants. This has created opportunities for local
unemployed persons for jobs and development of entrepreneurship.

PSU No. Of
employees(31.12.2010)
SAIL 113403
RINL 17900
NMDC 5902
MOIL Ltd 6676
MECON 1851
KIOCL 1349

1.3 Growth over the years

The steel industry of India has seen tremendous but a steady growth,
backed by many initiatives taken by Indian Government. The crude steel of India
will grow at an annual rate (CAGR) of more than 10 percent during 2010 – 2013.
Additional initiatives taken by Government, is proving to be helpful to boost
economic growth, by injecting various funds in industry such as Infrastructure,
Construction, Power and Automobiles. This growth impetus will definitely cater
future growth of Indian steel industry. The prospective growth of the Indian steel
industry not only attracts Domestic capital, but numerous other foreign global
steel players have been planning to invest the market or have announced their
4

expansion plans. For example, AreclorMIttal & POSCO have planned mega
Greenfield projects at many locations of India. Additionally few other global
players have entered into strategic partnerships or joint ventures with the Indian
Steel majors to capitalize on existing on the existing client base in the region.

Global Perceptive: Steel Industry is a booming industry in the whole world.
The increasing demand for it was mainly generated by the development projects
that have been going on along the world, especially the infrastructural works and
real estate projects that has been on the boom around the developing countries.
Steel Industry was recently dominated by the US but this picture is changing with
a rapid pace with the Indian steel companies on an acquisition spree.

1.4 Acquisition over the years

The steel industry has seen major acquisitions over the years and profound
the status of one of the most dynamic industry in the world. Mittal Steel, has
acquired World’s largest Steel company Arcelor Steel to become the world’s largest
producer of steel named Arcelor-Mittal. TATA Steel has acquired the world’s fifth
largest company, Corus, with ever highest steel price. The increasing needs of steel
by the developing countries for its infrastructural projects have pushed the
companies in this industry near their operative capacity. World steel industry is in
booming phase where Mergers and Acquisitions are going on all around the world.
Thus the present Global scenario suggests that the OECD Countries do not have
their monopoly in Steel Market.

1.5 Major Players in the Industry

Steel industry was mostly dominated by Public sector before liberalization
in 1991. But liberalization gives a new life to the industry. It allows new private
players to enter in the market and encourages existing players to expand their
capacity. This eventually brings competition in the market. Presently India is the
5th largest producer of crude steel in the world and is expected to become the 2nd
largest producer by 2015-16.

Production of crude steel (in Mn tonnes):
Public Sector 16.714
Private Sector 48.161
Total 64.875
Percentage share of Public sector 26%

5


Production of sponge iron (in Mn tonnes):
Coal based 15.52
Gas based 4.48
Total 20

Public sector players:
• Steel Authority of India Ltd(SAIL) -- market leader public sector company in
the sector
• Rashtriya Ispat Nigam Ltd. (RINL)
• NMDC Ltd.
• MIOL Ltd
• MSTC Ltd
• Hindustan Steelworks Construction Ltd. (HSCL)
• KIOCL Ltd
• Bird Group Of Companies (BGC)

Private sector Player:
• TATA Steel Ltd. – Private sector market leader
• ESSAR Steel Ltd.
• MUKAND LTD.
• Sun flag Iron & Steel Co. Ltd.
• JSW Steel
• Bhushan Steel Ltd.

1.6 Foreign Player in Indian market:

Recently, the steel industry is receiving significant foreign investments such
as POSCO—South Korean steel producer—and ArcelorMittal Group—UK/Europe
based steel producer—announcing plans for establishing about 12 MT production
units each in India. But clearance from Environment ministry is delaying in the
process. Such competition in market increases the production capacity of sector.
Growth in infrastructure sector is also having an increasing effect on demand of
steel. Such competition will help India to become market leader in world and may
help to become a net steel export country.

6


1.7 Commodity prices of Steel movement:

Commodity Futures markets are prominent parts of the global financial
economy. Futures trading have been an important agency in the way the financial
economy has grown to its contemporary form. My role in the project includes
investigating the role of commodity futures markets in the financial economy and
discusses its theoretical understanding in light of the trading practices in these
futures markets. The focus of our research has been maintained on steel futures
traded on a commodity exchange.

The result of the limited research that has been done in the short duration
of 1 month brings forth the uncertainty of investor behavior and challenges the
market oriented idea of rational investors as proposed by the theory of futures
trading.

Our research focuses on the importance of commodity futures markets and
the role they play in commodity price stabilization. The proponents of futures
markets argue about the importance of futures markets based on the factors like
price discovery and price stability. Price discovery and price stability parameters
are only partly true in any given derivative market and, therefore, show the
weakness in the theoretical argument in favour of commodity futures markets.
Derivative trading in steel has been chosen as the commodity futures in focus due
to the inherent steel price instability and its latest introduction as a commodity to
be traded on the futures market.

Steel demand has been growing continuously in the developing economies
and any sudden price fluctuations creates detrimental effects in the production
process within these economies, as they heavily depend on steel for infrastructural
growth. So, steel futures might create a condition of further price fluctuations due
to speculative activity and thus can prove to be harmful for the producers and
consumers of the emerging economies. These producers and consumers lack the
capability to accommodate with the problems of over-production and sudden
price rise, impacting the aggregate demand and supply which often has been
observed to be imbalanced.

1.8 Dumping:

Many nations are accused of this ‘heinous crime’ on a day to day basis.
Though legally speaking ‘dumping’ is not a ‘crime’ as per WTO, which surely does
not encourage it but at the same time permits this activity. Things get stranger
when China comes into picture.

7

Well what really is dumping? Dumping is exporting a product to another
nation at a price below normal value. Now that raises another question: what is
this ‘normal value’? It is a price that the exporting nation charges in its domestic
market (or an approximation thereof).
Now we see why dumping is discouraged. Firstly it comes under the
classification of predatory pricing. Secondly and more importantly it distorts the
domestic market of the importing nation. It is allowed on the name of free market.
Under GATT, nations can take action against dumping so that the final value of
the foreign product in their market is close to normal value of the dumped product
at home. Authorities investigate such cases and impose punishment that is valid
for roughly/generally a term of 5 years. The incidence of these cases is maximum
in two obvious nations. Argentina being one and the other being INDIA.
Finally we come to the astounding bit. China is not granted a "Market
Economy Status" by the EU. For now the perplexing question arises: when cases of
dumping come up against China, how do we calculate the normal value of Chinese
product. To do so, an ‘analogue market’ is chosen, i.e. the normal value is
calculated for that domestic market.

Antidumping and Indian steel industry:

Against India cases:
• Thailand to impose antidumping duty on Indian steel products
• EU to discontinue anti-dumping duty on Indian steel wires

Cases by India:
• India imposes anti-dumping duties on stainless steel from abroad
• Anti dumping duty on Chinese tyre and steel

2. Macro-Economic variables affecting the industry

2.1 GDP/Economic Growth:

India’s economic growth is dependent upon the growth of the Indian steel
industry. Consumption of steel is considered as an indicator of economic
development. While steel continues to have an iron grip in traditional sectors such
as construction, housing and ground transportation, it is also increasingly used in
engineering industries such as power generation, petrochemicals and fertilizers.
India occupies a vital position on the global steel map, with the establishment of
8

new steel mills, acquisition of global scale capacities by players, continuous
modernization and upgradation of older plants, improving energy efficiency and
backward integration into global raw material sources.
Global steel giants from across the world have shown interest in the
industry due to its phenomenal performance. For instance - the crude steel
production in India registered a year-on-year growth of 6.4% in 2010 and reached
66.8 Million Metric Tons. Indian crude steel production will grow at a CAGR of
around 10% during 2010-2013. Moreover, with the government proactive incentive
plans to boost economic growth by injecting funds in various industries, such as
construction, infrastructure, automobile, and power will drive the steel industry in
future. The report also reveals that, steel consumption in India is expected to grow
significantly in coming years as per capita finished steel consumption is far less
than its regional counterparts.
According to government estimates, the Iron and Steel Industry contributes
around 2 per cent of GDP. Indian steel industry has travelled a long journey from
having a negligible global presence to a globally acknowledged industry for its
product quality.

9


2.2 Inflation:

High inflation has severely hit the Steel Industry. High inflationary rates have
caused slowdown in the sector. Automobile industry and construction industry
have been the major consumers of steel commodities. Slowdown in these
industries has further hit the steel industry adversely.
Recent policy rate hike by 25 basis points, the 12th in the series since March
2010 has forced the commercial banks to pay more while borrowing from RBI.
Inflation in August rose to 9.78%, the highest in 13 months compelling RBI to
increase the rate to 8.25%.

Construction Industry: Experts of construction and real estate industry sense
that the current rate hike and the anticipation of another round of hike in the
coming months is likely to blow down the demand for new houses and the
availability of loans in India. Many new housing projects are on hold and many key
construction companies have slowed down their activity in the market.

According to the construction firms in the country, the bookings for the
new flats have gone down in the last few months. It is becoming very difficult for
builders to find source of capital to construct flats because banks are not providing

10

loans easily as they used to do earlier. Moreover, the number of late payments and
defaults has also gone up in the last months.

Automobile Industry: This industry has also been hit by weak demand. The
number of new vehicle orders has gone down drastically. Even before the festive
season demand is not that high as it used to be. Key players like Tata and Maruti
are also facing a similar problem. Less demand of vehicle is leading to a “no-
discounts” season which further discourages people from buying the vehicles.
Many smaller manufacturers have already considered cutting down the new
production units and are planning to manufacture less number of vehicles of
different models.

According to the experts of automobile industry, the competition in the
Indian automobile industry has grown fierce, especially in the family car segment.
Every player wants to develop cheap, good looking fuel efficient car. On the other
side, increased loan rates and surging fuel cost have demotivated customers from
buying cars. All this, when coupled with each other, land the automobile industry
in deep troubles in coming months.

This overall scenario explains the impact of hike in cost of borrowings on
the profitability, investment and growth of many companies which are dependent
on Steel directly or indirectly. The global recession like outlook has added the
remaining fears in the investment sector as well.

Few effects of inflation are:

• Seller’s market results in deterioration of the quality of goods produced. Give
impetus to speculative activities.
• Most serious: disrupts the smooth functioning of the price mechanism.
• Wage & Salary Earners: wages do not rise proportionally with rise in cost of living.
If they are well organized in trade unions, they may not suffer much.

Unemployment:

The demand for goods and services and a return on investment are drivers
of machine of capitalism. If people are unemployed, production of goods and
provision of services falls off, and simultaneously, the people who are unemployed
lack the wherewithal to purchase goods and services. People who still have money,
investors, are reluctant to invest any money in the production of goods or the
provision of services because when production and consumption are down, there
is no opportunity to get a return on the investment.

11

The ability of government to provide for people is also seriously
compromised. When there is high unemployment, people pay less in income taxes
and also pay less in sales taxes because they purchase fewer goods and services.
This leads to less in the way of public services, which includes everything from
police and fire protection to the staffing for the municipal swimming pool and
rubbish pickup.

Effects of Unemployment:

-Low economic growth.
-A loss of production and output because those who are unemployed are not able
to add towards GDP.
-A misallocation of resources this occurs because those who are employed will
have the burden of paying for the unemployed. This in time will result in a fall in
living standards.
-A decline in labor market skills because those who are persistently unemployed
will lose valuable skills.
-A cost to the government for the simple reason that the government must fund
the unemployed increasing its budget deficit.
-High unemployment means there is an excess supply of jobs. This means that
employers can more easily find labor and are less likely to increase wages to
attract workers.

Unemployment

Indian
Steel
Industry
Low Economic
Inflation
Growth

12


So, we can observe that Unemployment, Inflation and Low economic growth are
related to each other and affect the Indian steel industry adversely.

2.3 Government Policies/Liberalization:

Though Indians were familiar with Steel from Vedic Age, more than 4000
years ago, the initialization of Indian Steel Industry was begun by Sir Jamshedji
Tata in 1907. TISCO was started in 1907, later Mysore Iron and Steel Works (later
renamed as Visvesvaraya Steel Works) was established in year 1936, and in year
1939, the production of Steel was started in another private company the Iron and
Steel Company. Thus, we can conclude that India at the time of independence,
India possessed a small but viable steel industry with an annual capacity of 1.3
million tonnes. In 1951, the finished steel production in India was 1.1 million
tonnes.
After Independence, Steel Industry became one of the major focuses in
planned economic development; it became one of the key sectors for public
investment in first five year plan itself. The phenomena started with the signing of
agreements with Germany in 1953 to set up a plant in Rourkela, Orissa. Later, in
1956, two more agreements with USSR (for Bhilai Steel Plant) and UK (for
Durgapur Steel Plant) had been signed. The successive capacity augmentations at
Bhilai, Durgapur and Rourkela helped the capacity to further rises to 2.5, 1.6 and
1.8 million tonnes per annum respectively by the end of 60s. Bokaro Steel Plant
was set up in 1973-74 with capacity of 2.5 million tonnes per annum. The major
restructuring took place in 1978, when Steel Authority of India Limited (SAIL), a
Public Sector Enterprise came into picture with an aggregated capacity of over 10
million tonnes per annum. The first on shore public sector integrated steel plant
was set up in 1992, the Rashtriya Ispat Nigam Limited with a capacity of 3 million
tonnes per annum. During the first two decades 1950-1960 and 1960-1970, the
average annual growth of Steel Production exceeded 8 percent, from 1970-1980 the
growth came down to 5.7 percent and boosted up marginally for next decade to 6.4
percent per annum.
Before 1990s, the steel industry was by and large the exclusive safeguarded
and controlled by Public Sector, the TISCO being the only exception. The new
economic policy announced in 1191, better known as liberalisation phase, was no
doubt a milestone in the evolution of Indian Economy. But also, the liberalisation
phase of Indian Economy, makes the Iron and Steel Industry undergone a sea
change. The process of economic reforms accompanied in substantial liberalisation
of policies and institutions governing trade, industry and finance. Steel Industry
has become one of the foremost sectors to be opened under the New Economic

13

Policy. Substantial Private Investments flowed in with the consequent change
indicating a new beginning for the interplay of free market enterprises in the vital
sector.
• Industrial and Trade Policy Resolutions in 1991 with regard to the Steel industry
– Exempted from industrial license system
– Abolition of price controls
– Liberalizing conditions for FDIs
– Liberalization of imports and exports
– Lowering tariff level

If we compare both pre and post liberalization era with the concern of Steel
Industry, there are many interesting and significant structural changes occurred.
The Steel Market of India has been changed from a Seller to a Buyer market, at the
consumer or demand end. The excessive control exercised by Government has
been replaced by healthy Competition from private players. The price control by
Government i.e. administered price has been replaced by Supply-Demand market
driven prices. The structure of Indian Steel Industry was significantly changed with
the advent of private sectors using World Class technologies and thus capacities
have further improved in post liberalization era.

WORLD CRUDE STEEL PRODUCTION 2009

Europe, 194.73,
Oceania, 6.01, 0.49%
15.88%
Rest Asia, 151.88,
12.39%

C.I.S. (6), 97.36,
7.94%

India, 56.61, 4.62%

North America, 82.25,
6.71%

South America,
Fig1. World Crude Steel Production 37.82, 3.08%

Africa, 14.84, 1.21%

China, 567.84,
46.32%
Middle East, 16.59,
1.35%

14


Finished Steel Production

70,000.0 66,013.0

60,000.0
50,000.0

(0 0 0 ' T o n n e s )
40,000.0
30,000.0
20,000.0 13,566.0
10,000.0
-
1991 2011

Fig2. Growth of Indian Steel
Industry since
Liberalization
There has been a shift towards the selection of the product mix. For
example, private players like TISCO were mainly confined to the production of
long products. The only producer of hot rolled flat products was SAIL in public
hot-rolled
sector. Now including TATA Steel, there are 5 main producers of flat products of
Steel,
Steel in private sector. With the liberalisation phase, there has been a clear focus
on state-of-art technology. The new technologies like Corex Thin Slab Casting and
art
“Compact Strip Mill Technology”, “DC Electric Arc Furnaces”, “Twin Shells AC
EAFs” etc have been providing extra edge to Indian Steel Industry. The focus of
industry changes from mass production to Consumer Satisfaction and
Outstanding Quality of steel products in the competitive environment. Indian
Steel has been highly accepted in international markets.
The Indian steel industry, with the annual production of about 1 mt in 1947
i.e. at the time of our independence, has come long way to reach the production of
about 66 mt in 2010-11. The steel industry is presenting promising future growth as
11. steel
major players in the industry have announced their plans for significant
investments in mounting their capacities. Remarkable development of the steel
industry with active participation of private sector and integration of India steel
industry with the global steel industry has also induced the government to come
up with a National Steel Policy in 2005. An all new policy framework, The National
Steel Policy 2005 was drafted with the aim of establishing roadmap and framework
roadmap
for the development of the steel industry. The policy visualizes steel production to
reach at 110 mt by 2019-20 with annual growth rate of 7.3 percent. As later sections
-20
will show these expectations are not excessively high.

With increasing requirement for huge investments in the industry private
asing
sector’s role would be critical in the expansion of the steel industry. As it appears,
steel industry will continue to be dominated by a few large players and the

15

industry will remain oligopolistic – as it is internationally. The share of fixed cost
to total cost for selective steel producers in India is very high making it prone to
increasing returns to scale and the consequent market structure. The key players
like TISCO, public sector entities, POSCO, Jindals, Essar, and Arcelor-Mittal will
be among the major players accounting for the bulk of the 100 plus million tons of
production in the future.

Recent Major Initiatives by Ministry of Steel:

• National Steel Policy 2005 is under review and the process for drafting a 'National
Steel Vision' has since been initiated
• Five year strategy paper has been prepared for promotion of Steel sector in the
country.
• A policy paper on R&D has also been prepared with special focus on beneficiation,
coal ash reduction and promotion of production of high grade value added Steel in
the country.
• New techno-economic bench marks have been evolved on International pattern
for improvement in performance of Steel PSUs.
• Sevottam Compliant Citizen's Charter has been evolved and included in the Result
Framework Document (RFD) of the Ministry.
• In order to enhance financial powers of SAIL Board, the Government conferred
'Maharatna' status on SAIL in May 2010.
• The Government conferred 'Navratna' status on RINL in November 2010 to enable
the Company to become globally competitive.

• International Coal Ventures Limited (ICVL), a Special Purpose Vehicle, with
equity participation to an extent of ` 3500 crore by SAIL, RINL, Coal India Ltd,
NMDC and NTPC Ltd. for acquisition of metallurgical and thermal coal assets
abroad has been incorporated. ICVL will function like a Navratna company (with
powers to clear proposals involving investment of up to ` 1,500 Crore). ICVL is
assisted by a panel of investment bankers on acquisition of coal assets abroad
through equity purchase, JVs in existing mines or Greenfield projects in Australia,
Canada, Indonesia, Mozambique, Russia and USA. A MoU was signed between
ICVL and the Provincial Governor of Kalimantan, Indonesia on 25th January, 2011
envisaging direct allocation of mineral resources in the Province for ICVL.
• 8.38% of the total government equity in NMDC was offered for sale through FPO.
The entire proceeds from the offer for sale totalling ` 9930.42 crore has been
deposited in the government account. Disinvestment of 10% Government of
India’s shareholdings in MOIL has been completed. The Government earned `
618.76 crore by disinvestment of MOIL.
• The Government has also decided to disinvest 10% of its shareholding in SAIL and
for raising of 10% of additional equity by SAIL, in two discrete tranches. Each

16

tranche will consist of 5% raising of fresh equity capital by SAIL and 5%
disinvestment of Government of India’s share. The process has since commenced.
• In order to encourage R&D activities in iron & steel sector, Ministry of Steel is
providing financial assistance from Steel Development Fund (SDF) and Plan Fund.
64 research projects initiated by public and private undertakings, research
laboratories, educational and other promotional institutions have so far been
approved at a cost of ` 442 crore during 2010, of which the SDF component is ` 278
crore. So far 31 projects have been completed and 24 research projects are
underway.
• ` 118 crore was allocated from Plan Fund during the 11th five year plan for
promotion of R & D in steel sector. Under this scheme 8 R& D projects have been
approved with Plan fund of ` 111 crore.
• For ensuring quality of Steel, seven items such as galvanised sheet, steel wire for
pre-stressed concrete etc. have been brought under a quality control order issued
by the Government. The matter to bring more steel items under this order is
under examination.

(Percent) Construction sector: Contribution to GDP
10
8.7 8.9
9 8.4
8
8 7.4
7
6 6.2
5.7 5.8 5.8
6
5
4
3
2
1
0
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Fig3. Indian Steel Industry Contribution to GDP

17


2.4 Environmental Concerns:

There is a rapid increase in population and economic development has led
to harsh environmental deprivation that undermines the environmental resource
base upon which sustainable development depends. The economics of
environmental pollution, depletion and degradation of resources has in fact been
neglected as compared to the issues of growth and expansion. India has been no
exclusion to this global trend, rather the trends of environmental deterioration in
India, because of the substantial increase in its population, has been far more
prominent as compared to other developing economies.
Major Environmental Issues concerning Indian Steel Industry:
Selection of plant site-effect on neighborhood, ecology and communication
facilities.
Space for water treatment & recycling, solid waste disposal.
Pollution control measures-Pollution cannot be completely eliminated- only
levels can be reduced.
Up to 15% cost of capital equipment is being incurred on pollution control
devices.
Obtain clearances by State Govt. & other Govt. agencies (viz. pollution control
board, forest deptts. etc) and Central Govt.

Indian government has started a strict and rigid policy framework for
protecting the environment. All projects found violating the guidelines given by
Ministry of Environment, has been either removed or restricted. Recently India’s
biggest direct foreign investment project has been by South Korean Firm got itself
in a controversial position. The main concern was the environmental impact of the
project. And then minister of environment did not approve the project. But, a huge
and controversial steel plant – got the go ahead from the Indian environment
ministry, despite years of fierce opposition from local campaigners who claim that
the lives of tens of thousands of villagers will be destroyed along with swathes of
forest and coastline.

2.5 Availability of raw materials:

As far as raw materials are concerned India enjoys a far better position than
many of the other producers around the globe. In addition to that we have good
understanding and appreciation of cost and operation efficiency. These need
improvement and constant endeavor to meet the best industry standards.
Benchmarking needs to be done. The part that India is playing now when

18

compared to its position a quarter of centuries ago clearly outlines the
improvement of these factors of production. Now we are into highly competitive
and superior products. The infrastructure problems have hindered other growth
infrastructure
yet our products today can be found in the most advanced markets and in no way
are inferior or sub-quality. Not to undermine these achievements in any form, the
quality.
glaring fact today still is that the operational performance in our case falls way
performance
short of that of the best of advanced nations; in majority of cases. The problems
that mar our plants are high energy consumption, nominal Research and
development, high material consumption, low efficacy, low labour produproductivity,
out graded technology to name a few.

Graph of per capita steel consumption

This industry needs efficient raw material base with enough supportive
infrastructures. India today enjoys a leading position due to its raw material base
but unless other related sectors show an equally and much needed growth this
ther
advantage will slowly turn to zilch. The entry of China as a global player and the
exponential rise in prices of raw material like iron ore and coking coal have
consequently increased the im importance of supply and possession of raw material.
ossession
The gaping question now is whether we develop our own resources or import at
cheaper price from elsewhere and whether we export our high quality iron ore or
use is for domestic production. The technology used to produce steel plays a major
role in need of raw material.

Major raw materials to be considered are:
r
• Iron ore
• Coking Coal
• Non-coking coal
• Raw Materials for Ferro
Ferro-alloy Industry

19


• Power
• Labour
• Capital costs
• Infrastructure

Iron ore:

India has got an initial advantage of having huge resources of iron ore the
main raw material required in the production of steel. But the question is whether
we reserve this for our domestic use and for attracting investment into the country
or we export it and earn profit in the short run. The estimates for long term predict
the resources to last for 20 to 40 as per different estimates. Alos the prodtion is
more in from of fine than in lumps while the technology used in our country uses
lumps, thereby creating a mismatch. The exports consequently are more in form of
fines. The need is to upgrade the technology to the use of fines. As of today the
production is driven by rising exports. Then there is the policy of granting captive
mines to provide a constant supply of raw material in the country. These gives a
competitive advantage to a few players over others. Further the tight demand of
iron ore in the international market gives these a current cost advantage.
The other issue with iron ore is that most f the mines are ecologically
sensitive area hence there is a problem in their exploitation for industrial means.
The major silver lining is that the government is serious about maintaining the
competitive advantage and has set up several committees to look after it.

20


Zonal Distribution of iron ore in India

Coking coal:

The picture here is quite dismal with all the projection leading to the
inevitable conclusion that the supply of coking coal is very short. The quality of
coking coal a very major input in the steel industry is quite low for our domestic
production.
We have major dependence issues on imported coal. The suppliers have a
dependence
strong bargaining advantage; hence we end up paying higher prices. High import
volumes need good ports, rail and road infrastructure which need to be developed.
Further few plants are far away from ports which complicates matter.
which

Non Coking coal:
The country has large reserves of non coking coal and a number sponge
iron units are coming up due to the cost competitiveness of technologies based on

21

non-coking coal. More than 80% of the total reserve of coal in our nation is non-
coking coal reserves. Though the grade of coal that the SI are getting are inferior
D, E and F instead of B and C.

Raw Materials for Ferro-alloy Industry:
The steel industry development leads to demand of inputs such as ferro-
alloys. The major minerals needed are manganese ore and chrome ore. A major
input for utilization of these ore is cheap electricity which is not always available
in area where these are found.

Power:
Electric steel making is curbed due to very high rates of electricity in this country; but
things look better with a huge number of power projects underway currently Also
technology that use the power efficiently need to be developed for lower input costs
Labour:
A source of major competitive advantage when it comes to cheap labor availability lies in
favor of India. The productivity of older plants has been a major problem due to high
number of workers being employed in peripheral activities. But these are being resolved
through schemes like voluntary retirement. Further training and development are need to
reduce the low productivity. Though most of the newer plants have overcome these
problems, our nation is yet to come up with own solution.

Capital costs:
Another major shortcoming has been the high rate of capital. Need for strong
government policy to neutralize this is felt throughout the industry. The best solution is
the right and well thought use of capital for projects as well as for maintenance.

Infrastructure:
The infrastructure is grossly short of what is needed by the steel industry. The
costs of transportation are humungous and hit at both the ends; carrying in input and
carting out outputs. Ports need to be further developed and the turnaround time must be
increased.

2.6 Flow of money and tax measures:

This can be divided product wise, segment wise, company wise etc. It is
how the money in form of investment, import, export etc. changes hands and what
is its quantum. The detailed discussion shall be dealt with in the following section
of this report. We here present a glimpse of relevant data.

22


23


Tax measures:
Export tax has been introduced on specific iron and steel products so as to
achieve and increase in supply in domestic market. Predating this was the Rs.300
per 50 tonnes tax rate; which has been fixed to 15% flat.
This is to deal with saving the resources for the nation considering the
growth of our GDP and future projection of our need; though some have reported
excess stock accumulation due to these restrictions. Further there have been
proposal of exemption of certain companies from paying these taxes.
Duty Entitled Pass Book was restored form 14th Nov, 2008 and 5% import
duty on iron and non-alloy steel was re-imposed from 18th Nov., 2008. Central
Value Added Tax was reduced to 8% for steel products from 24th Feb.,2009.
Countervailing duty on Thermo Mechanically Treated bars and structural was
reintroduced from 02 Feb.2009.

2.7 Growth of complementary Sectors:-

Construction materials and equipment sector accounts for approximately
8.6% of India’s GDP and accounts for nearly two-third of the total construction
costs on an average. The share of construction materials in project costs ranges
from 40-60% and the corresponding cost for construction equipment ranges from
5 to 25%. Steel forms a major part of the construction industry. Unlike cement
where almost 100% of Cement production is consumed in construction only 40 -
60% of steel production goes into Construction.

The Indian steel industry ranks fifth in the world with crude steel
production of 55.1 MT in calendar year 2008 up from 19.3 T in 1994. The steel
production has grown at a CAGR of 7.8% over the same time frame. The share of
India in global crude steel production has increased from 2.7% in 1994 to 4.1% in
2008.
The structure of the Indian steel industry comprises of primary producers,
secondary producers and small scale stand-alone processors, with an estimated
installed capacity of 57 MTPA, comprising primary producers (20.7 MTPA),
secondary producers (11.5 MTPA), and others (24.6 MTPA).

During 2007, there were an estimated 970 induction furnaces (IFs) working
in the country in the secondary sector with the maximum located in Punjab (119
units), Uttar Pradesh (107), Maharashtra (73), Gujarat (62), Orissa (57), and West
Bengal (43). There are also an estimated 39 working EAFs in the secondary sector.
The apparent consumption of finished steel in India has increased from 25.1 MT in
1999-2000 to 54.7 MT in 2008-09 at a CAGR of 9%.
24


The construction sector accounted for around 45% of India’s steel
consumption during FY2008. Other major user sectors include machinery
manufacturing and engineering (30%), steel units (18%) comprising CR/GP/GC
and tube units, automotive (4%), and consumer durables (2%).

Consumption pattern by End user
industries, 2008-09

Steel & Tube unit, 18%
Machinery & equipments 30%
Automotive 4%
Construction 45 %

Source: IMF:- Annual Indian steel report

It is estimated that the growth in India's steel consumption will primarily
be fuelled by demand for construction projects worth Rs 45-50 trillion4. The scope
for raising the total consumption of steel is huge, given that per capita finished
steel consumption is only 44 kg – compared to approximately 180 kg across the
world and 320 kg in China.
The National Steel Policy has a target for taking steel production up to 110
MT by 2019–20. Nonetheless, with the current rate of on-going Greenfield and
Brownfield projects, the Ministry of Steel has projected India’s steel capacity is
expected to touch 124.06 MT by 2011–12. India's steel capacity is likely to be 293 MT
by 2020. An investment worth Rs. 8.8 trillion is likely to go into the steel sector by
the end of the year 2025.
Thus, steel boosts all these complementary sectors and plays a key
role in the construction industry which forms the backbone of every country. The
investment for a steel plant is huge as generally, steel plants involve townships and
thereby leading to the advancement of various sectors of that region. Also, the
railways is one more sector which involves investment of 180,000 INR (Public) and
120,000 INR (Private) for construction purposes as per Planning Commission

25

Working Group Report on Construction for the 11th Five Year Plan. Most of this
investment will require steel as the basic raw material.

2.8 Labour Skillfulness and Availability:-

S.no Category Details

1.a Construction material Rs. 495,000 Cr.
1.b Construction equipment Rs. 180,000 Cr.
1.c Manpower Rs. 108,000 Cr.
Detailed requirements:-
Materials (major)
2.a Cement 381 million tonnes
2.b Steel 150 million tonnes
2.c Manpower 92 million man years
2.d Engineers 3.72 million man
years
2.e Technicians 4.32 million man
years
2.f Support staff 3.65 million man
years
2.g Skilled workers 23.35 million man
years
2.h Unskilled/semiskilled workers 56.96 million man
years

These resources would be required under the 11th Five Year Plan for the above
mentioned investments. It is, therefore essential, that necessary measures be taken
to prepare the industry to meet this challenge.

As per Cement Manufacturers Association of India, ASI, IMaCS
analysis the steel industry employs 0.50 million of employees which is nearly 44%
of the total people employed in the construction sector (Construction sector
includes cement industry (0.14 million employees and constructionequipment
sector employs the rest percentage of employees)). This shows how critical it is for
this sector to have skilled employees.

Major Regions of Employment Concentration:

In the steel segment we see that for over 50% of the total number of personnel
engaged in the segment.

26


The zone-wise distribution is as follows:
wise

The zones are defined as:
• North: Jammu & Kashmir, Punjab, Haryana, Himachal Pradesh, Uttar
Pradesh, Uttarakhand, Delhi
• South: Tamil Nadu, Andhra Prad
Pradesh, Kerala, Karnataka
• East: Bihar, Jharkhand, Orissa, West Bengal, Sikkim, Madhya Pradesh,
Chhattisgarh
• West: Maharashtra, Gujarat, Goa, Rajasthan, North East: Assam, Mizoram,
Manipur, Meghalaya, Tripura, Arunachal Pradesh, Nagaland

Zone wise distribution of personnel
employed in the steel segment in India

North 14.7%
West 11.5%
South 20.5%
East 52.5%
North East 0.8%

Source: NSDC (National skill development corporation) HR & skill requirement
report

In the Steel Segment the distribution of personnel engaged in the core
operations of casting and hot rolling (on the shop floor) as well as the proportion
shop-floor)
of personnel engaged in the sales /marketing of finished products is as below.
“Others” in the table below includes personnel engaged in all other operations at
steel units, such as mining, raw material processing, iron manufacturing, liquid

27

Steel manufacturing and cold rolling, across all functions (i.e. manufacturing,
procurement, R&D, support functions, etc.).

The details of functional distribution are as below:
Functional distribution of human resources in the Steel Segment (Manufacture of
Finished products):-

Function Distribution

Production, QA, R&D 40-45%
Technical Services / Industrial 25-30%
Engineering
Purchase, Logistics, Stores 10-12%
Support functions (HR, Finance, etc.) 12-15%

Profile of people employed:-

The following figures illustrate the profile of people employed in the Steel Segment
across various
Categories:-
i.) Manager: -Grad engg / PGs with 7-8 yrs experience / diploma engg with 10-12
yrs experience + metallurgy background

ii.) Supervisor: - Diploma engineers with 3-4 yrs experience; Some ITI-trained
personnel with experience

iii.) Workmen: - ITIs / below 12th with /without experience

2.9 FDI/FII in Indian steel industry:

Foreign Direct Investment refers to inflow of investments to acquire lasting
management interest in an enterprise operating in an economy (generally a
nation) other than that of the investor. There are various ways through which a
foreign direct investor might acquire voting rights in an enterprise.

by incorporating a wholly owned subsidiary or company
by acquiring shares in an associated enterprise

28

through a merger or an acquisition of an unrelated enterprise
participating in an equity joint venture with another investor or enterprise

Promotion of foreign direct investment forms an integral part of India’s economic
policies. Foreign direct investment helps in accelerating economic growth by way
of infusion of capital, technology and modern management practices. The
Department of steel has put in place a liberal and transparent foreign investment
regime where most activities are opened to foreign investment on automatic route.
According to department of industrial policy and promotion, the FDI inflow
in India between the year 2000 and 2011 was approximately US$133000 million. Of
this US$4286 million was attracted by Metallurgical industries. Of the Total FDI
inflow of Rs88520 crore in the year 2010-11, the metallurgical industry attracted an
FDI of Rs.5055 crores. This is about 5.7% of the FDI inflow.

External Commercial Borrowings:

ECB is an instrument used in India by Indian corporations and PSU’s to access to
foreign money. ECBs include commercial bank loans, buyers' credit, suppliers'
credit, securitized instruments such as Floating Rate Notes and Fixed Rate Bonds
etc., credit from official export credit agencies and commercial borrowings from
the private sector window of Multilateral Financial Institutions such
as International Finance Corporation (Washington), ADB, AFIC, CDC, etc.

Overview of steel industry over last few years:

To understand the FDI in any sector it is important to study the present status of
the sector, its performance over last few years and the emerging trends in the
sector. Here are the highlights for the steel industry:
1. Backed by the liberalized government policies, the Indian steel sector is going
through an expansionary phase. The prospects for the demand are excellent
driven by high investment rate, accelerated growth in the manufacturing
industry and expansion in physical infrastructure creation.
2. Liberalization in the foreign trade has had a favorable effect on Indian exports.
Exports have grown fast and at a rate exceeding 25% per annum between 1991-
92 and 2002-03.
3. Demand for steel has been worked out on the basis of observed relationship
between steel consumption and selected macro economic variables under four
scenarios of GDP growth (i.e., of 7%, 8%, 8.5% and 9%) by 2011-12 as envisaged
in the Draft Approach paper for the Eleventh Five Year Plan. In the ‘Most
Likely’ scenario of 9.0% GDP growth, demand for steel works out to be 70
Million Tonnes by 2011-12. Therefore, it is envisaged that in the next five years,

29

demand will grow at a considerably higher annual average rate of 10.2% as
compared to around 7% growth achieved between 1991-92 and 2005-06.
4. India has necessary resources and capabilities to become a global supplier of
quality steel. Also there exists ample market opportunities in the neighboring
regions of Asia, Africa and the Middle East. Recognizing this potential, the
National Steel Policy, 2005 has estimated an annual growth of around 13% in
export of steel in the next decade and a half.
5. There are many technological developments, which have been commercialized
abroad to reap the benefits in both equipments and processes. However, these
are yet to be adopted widely in India. The Indian Steel Industry has to come
forward and adopt these technologies on priority basis to make their products
competitive internationally.

The focus of National steel policy 2005 is to achieve global competiveness not
only in terms of cost, quality and product mix but also in terms of global
benchmarks of efficiency and productivity. It aims at indigenous production of
over 100 million tonnes by the year 2019-20. In the year 2009-10 the production has
reached levels of 50 million tonnes.
In order to achieve the goal of 110 million tonnes by 2019, the industry needs
additional capital to the extent of Rs.2, 30,000 crore. However the cost of capital in
India is one of the highest in the world at about 11% p.a. Therefore, In such a
scenario Foreign direct investment is expected to play a major role. So the FDI
would be encouraged in the steel sector.
National steel Policy 2005 also recommends periodic review of External
commercial borrowing norms to facilitate smooth inflow in debt and to bring
down the cost of capital. This would help FIIs to invest in Indian steel companies
through a route different from FDI.

Investments in Complementary sectors:
Apart from huge investment required in the steel sector, associated industries also
require investments so that they can serve the sectors wells. According to planning
commission report on 11th five year plan the investment required in complementary
sectors in these 5 years is as follows:
• Mining :
Iron Ore: Rs11800 crore
Coal: Rs.2700 crore
• Power : Rs.12,500 crore

30


3. SWOT Analysis of Indian Steel Industry:

Strengths:

Abundant availability of raw material like Iron ore, limestone and Coal in the
country
(India is the sixth largest producer of iron ore and the tenth largest producer of crude
steel in the world)
Availability of huge man power
Low Labor wages – major cost advantage
Developed production base

Weaknesses:

Poor technology being used in mining work
Dependence on other countries for coking coal
Low R&D investment by the government and private players
Inadequate Infrastructure in the country
High cost of capital
Labor productivity in India is still very low. (According to an estimate crude steel
output at the biggest Indian steelmaker is roughly 144 tones per worker per year,
whereas in Western Europe the figure is around 600 tones.)

Opportunities:

Huge and growing domestic demand
Consolidation of small players into a big producer
Exports
Unexplored Rural market which provides a huge platform for production as well as
consumption.

Threats:

Demand Volatility
Threats of substitute (Plastic, Aluminum etc.)
Technological changes
Price war
Tough competition from China
Protection policies in Western countries

31

Global economic slowdown
Dumping by competitors

4. Future Prospect

4.1 Steel Demand in Rural Markets:

At the Macro level, growth in total finished steel consumption depends upon the
rate of growth in GDP and the estimated ‘GDP-elasticity of steel demand’ (i.e.,
observed response of steel consumption to changes in GDP/relationship between
steel demand and GDP calculated on the basis of past time-series data). GDP-
elasticity, in its turn, is determined primarily by the following structural factors:
• Rate of investment/capital formation
• Structure of the economy, particularly, the share of steel intensive manufacturing
activities and their growth
• Technological factors (e.g., norms of production, considerations of material
conservation, possibilities of inter-material substitution etc.) guiding usage of steel
per unit of production/activity in the end-using sectors.

Rural Demand: The rural consumption of steel is as low as 2kgs per capita per
annum. This is largely because steel is considered to be expensive among village
population. Efforts are being made to increase the rural demand by efforts
mention above. The focus is also on opening block level rural stock points. These
efforts are expected to take this demand to 4kgs per annum per capita by the year
2019-20.

To aid the government’s strategy to boost rural demand PSU steel firms like SAIL
and RINL are rapidly expanding in rural markets through expansion of their dealer
networks in the rural areas.
Steel authority of India Ltd. (SAIL) has rapidly expanded its network in the
past five years from 200 in 2006 to 2,579, while RINL which had no dealers in 2003
now has 120.

To increase the rural demand for steel SAIL has taken following steps:

32


• Distribution network of SAIL was expanded by establishing Warehouses at seven new
locations during April 2008 March 2009. During April-September 2009 marketing network
was further expanded by appointing two Customer Contact Officers and opening two new
Warehouses. With this, SAIL's marketing network has expanded to 37Branch Sales Offices,
26 Customer Contact offices and 67 Warehouses as on 1st January, 2010. SAIL has the
widest network of branches and warehouses in the country among steel producers, which
helps it in meeting requirements of wide range of customers at their doorstep in
time.

• SAIL has also expanded its dealer network extensively. As on 1st January, 2010, SAIL had
1963 dealers in 599districts. Items of mass consumption like Rebars and Galvanized Sheets,
required by common man are being sold through district dealers.

• Incentive schemes have been introduced by the company to encourage dealers to perform
consistently and promote SAIL steel. SAIL held its first dealer award ceremony "Gaurav
Samman" during April 2008 at Bangalore for the year2007-08 and second ceremony in May
2009 at Goa to reward well performing dealers based on their performance of 2008-09.

• SAIL is regularly holding Dealer meets, architects meets and masons meets along with its
dealers for promotion of SAIL steel. During April-December 2009, 55 dealer meets, 17
architects meets and 8 mason meets have been held.

• SAIL released two directories during 22nd National Steel Consumer Council meet held on
October 4, 2008 at Delhi consisting of details of SAIL Dealer Network and SAIL Warehouse
Network and distributed them among council members to increase awareness about SAIL
outlets.

• Technical presentations are made from time to time to project customers for launching
new products like corrosion resistant / earth quake resistant TMT Bars for construction and
rock bolt bars for tunneling.

• SAIL has undertaken various promotional activities to promote sales through
dealers. Some of them are given below:

• Wall Paintings done at various locations including interior areas.

• Broadcast of radio jingles on FM radio.

• Product brochures/technical literature given to the dealers for distributing among
customers.

• Promotional items (calendars/pens/key chains/T Shirts/Bags etc.) were distributed by
dealers among customers.

33


• Advertisement of dealers in print media/dealer details also updated on the SAIL website.

• SAIL Maximum Retail Price (MRRP) is prominently displayed at all dealer shops and also
regularly updated on SAIL website.

• Incentive schemes have been introduced by the company to encourage dealers to perform
consistently and promote SAIL steel.

• Participation in fairs and exhibitions highlighting various usages of steel.

• SAIL advertisement was released on train tickets and on few major trains like Shatabdi for
building brand awareness.

4.2 Exports Opportunities:

Exports in steel Industry has two main focuses
1) Exports of processed steel
2) Exports of Iron Ore
Its impact on industry and economy is completely different form each other.
Export of processed steel is normally considered as beneficial to steel industry
growth and overall economy but export of Iron Ore is considered as bad sign for
industry. As India is short of high quality steel and importing it from foreign, and
exporting of high quality iron ore is sign of inability to produce high quality steel
in country.
Iron and steel products are freely exportable as per the extant policy.
Government introduced schemes under the Duty Entitlement Pass Book Scheme
(DEPB) to facilitate exports. Under this scheme, exporters on the basis of notified
entitlement rates, are granted due credits which entitles them to import duty free
goods in return.
The national policy seeks to facilitate the creation of additional capacity,
removal of procedural and policy bottlenecks that affect the availability of
production inputs, increased investment in research and development, and the
creation of road, railway, and port infrastructure. The policy focuses on the
domestic sector but also envisages a steel industry growing faster than domestic
consumption, which will enable export opportunities to be realised.
Indian steel industry also needs to focus heavily on mining procedures. It
should acquire mines in other countries for sufficient supply of raw material and
grab the opportunity of exporting processed steel. Government also need to

34

regulate the mining industry so it can bring transparency into the system and help
steel industry to grow rapidly.

Export of Indian steel industry:

As we can observe form the chart that exports of steel is highly dependent
upon world economic condition. Recession in 2008-09 period is showing sharp
decline in export of steel. India needs to focus on producing high quality steel,
required for some specific purposes whose demand can remain inelastic even
during recession time.

Million Ton
5.3

5.2

5.1

5

4.9
5.187 Million Ton
4.8 5.1

4.7 4.918
4.774 4.787
4.6

4.5
2004-05 2005-06 2006-07 2007-08 2008-09

Source : http://www.cci.gov.in/

Customs Policy
The government has significantly reduced the duty payable on inputs to
steel production, on capital equipment and on finished steel products and has
streamlined the associated approvals processes. The government administers
schemes covering duties, licenses and taxes to support firms that export steel,
although some (for example, the Duty Entitlement Passbook Scheme and Duty
Free Replenishment Certificate) have the net effect of remitting duty in excess of
what was levied on the inputs to the production of the export goods (OECD
2006d) and are potentially subject to challenge in trade forums.

35


Special Economic Zones (SEZs)
The government introduced ‘special economic zones’ in June 2005, with the
aim of creating internationally competitive regions in which exporting businesses
can base their operations. Previously existing ‘Export Processing Zones’ (EPZ) have
been converted to special economic zones. Steel plants operating in special
economic zones are not subject to restrictive normal laws for the purpose of export
operations and also receive some additional advantages including tax holidays,
freedom to source inputs domestically or externally without any specific approval
or duty payable, and sales tax reimbursement on domestic purchases. However,
the proposed new economic zones will be relatively small, which may limit their
effectiveness given that economies of scale are one of the key advantages of such
zone.
It is estimated that world steel consumption will double in next 25 years.
Quality improvement of Indian steel combined with its low cost advantages will
definitely help in substantial gain in export market.

4.2 Development of New Technology:

New Technology is very important factor for overall growth of a particular
industry. It increases the output of industry by using same level of input. New
technologies can help in saving energy, increasing competitiveness, and improving
the environment. New technologies have the potential to change radically the way
steel is made and reduce energy consumption and greenhouse gas emissions more
than 50%.

Energy usage of Steel Industry at world level-

MMBTU/Ton
20

15

10
17
14 14 13 13.5 13 13 13 MMBTU/Ton
5 12 11 10 10.2

0

Source : American Iron and Steel Institute (www.steel.org)

36

Some of the technologies, which are being used by some developed countries and
can be brought to India, can help in improving productivity of steel sector. Some
of these techniques are as follows:
• Blast Furnace Optimization via Modeling
• Blast Furnace Optimization via Improved Analytical Techniques
• CO2 Abatement and Alternative Iron making Processes
• Suspension Reduction of iron Ore Concentrates Using Hydrogen
• Molten Oxide Electrolysis
• Paired Straight Hearth Furnace
• Basic Oxygen Furnace (BOF) and Electric Arc Furnace (EAF) Steelmaking
• Optimization of Post Combustion in the BOF and EAF
• Optical Sensors for Prediction of Carbon and Temperature in BOF and EAF
Furnaces
• Laser Contouring System
• Rolling Mill Operations
• Hot Strip Mill Model
• Sustainable Steelmaking Using Biomass and Waste Oxides
• Geological Sequestration of CO2 by Hydrous Carbonate Formation with Reclaimed
Slag

Some these technologies can enter into the industry very quickly, e.g. Laser
contouring of vessels and CFD modeling. Others, such as Alternative Iron making,
take longer. These are very high risk, capital intensive technologies that may take
many years to become commercially viable, and some may not become
commercial at all. Still, high risk research is highly valuable and much knowledge
can be gained. This know-how can be rapidly transferred to the shop floor. Steel
industry should continuously try to develop new steelmaking technologies.

Government Policies to encourage new Technologies:

Considering some recent events to overcome the fast-increasing coking coal prices
and widening gap between demand and supply, industry body ASSOCHAM has
submitted a proposal to encourage new green technologies used in steel
production with a view to reduce costs and carbon emissions while improving
productivity.
Recent technologies like COREX, FINEX and pulverized coal injection in blast
furnace have greatly increased their relevance at a time when India is set to
become one of the global steel hubs showcasing a variety of world class
technologies leveraging technical competencies.
The Associated Chambers of Commerce and Industry of India said that they
preclude the needs of a coke oven plant and use inferior quality coals with weak

37

caking properties directly into furnace without going through the process of
making coke.
Blending of hard and poor grades of coking coals has become a necessity, Coking
coal is not available in the required quantity and steel manufacturers have to
import them.

The National Steel Policy sets out the Indian Government’s vision for the
future of the steel industry. The central goal is the creation of an industry with 110
million tones of capacity and 100 million tones of production by 2019-20 —
implying an average growth in production of nearly 7 per cent a year. The Indian
Ministry of Steel estimates that achieving this goal will require major technology
upgrades at existing facilities.

Improving Intellectual Property Laws

The compulsory licensing regime, which still applies to some sectors,
enables the Indian Government to force the granting of a technology license if it
deems that a patent has not provided a sufficient public benefit at a reasonable
price. Its removal from the steel sector has provided greater security in intellectual
property ownership and will facilitate the transfer of intellectual property to India
and the development of indigenous technology solutions.
Latest technology must be adopted by Indian steel manufacturers for
production of superior quality of steel for these applications. For example, pre-
coated sheets can be used in manufacture of appliances, furnishings, electric goods
and public transport vehicles. Production and supply of superior grades of steel in
desired shapes and sizes will definitely increase the steel consumption as this will
reduce fabrication need; thereby reduce cost of using steel.
Apart from all this, Indian Government can introduce the concept of green
loan to players in steel industry. As steel sector is one of the most energy hungry
sector so even a few percentage decrease in energy usage, by the help of new
technologies, can help in reducing overall energy requirement of the nation.
Considering all this information, another important fact is Indian steel
industry is just catching up with some of the new technologies developed by
industrialized countries. But it is not investing in its own R&D programme. Indian
steel industry’s budget for R&D is less than 1% of its revenue. So industry needs to
find out technologies on its own instead of adopting it from other countries.

38


5. Conclusions:

Since independence, India has practiced stable growth in the steel industry, thanks in
part to the successive governments that have supported the industry and made efforts for
its healthy development. Further illustrating this plan is the fact that a number of steel
plants were established in India, with technological assistance and investments by foreign
countries. In 1991, a substantial number of economic reforms were introduced by the
Indian government. These reforms boosted the development process of a number of
industries - the steel industry in India in particular - which has subsequently developed
quite rapidly.

India’s steel industry is in a transitory stage. Yet, it is one which is seeing exceptional
growth thanks to the overall expansion of the economy. It is also witnessing the injection
of foreign investment. The overall growth projection of the steel-consuming industries of
India and Korea is pretty optimistic. Much the same is true of Southeast Asian countries
like Indonesia, Malaysia, Vietnam and Thailand. In such circumstances, India is bound to
witness huge investments in its steel industry and see unprecedented competition in the
race for control over essential raw materials, namely, iron ore, chrome ore and coal. New
technologies always have the power to entirely change the way goods are being produced
by any industry. The same thing is happening in steel industry. Being one of the most
energy hungry industries, new technologies are providing a great help to reduce its
energy consumption. New technologies also helping the industry to improve the quality
of steel produced in India, which is eventually helping in increasing exports of steel.
Presently Indian steel manufacturers are adopting most of the technologies from
developed nations, but instead of adopting it from other countries they need to start
focusing more on Research and Development and try to develop their own technologies.

But few macroeconomic variables like inflation and unemployment have adversely
affected the growth of Indian steel industry. Inflation disrupts the smooth functioning of
the price mechanism; increased loan rates and surging fuel have also discourages
customers from buying steel made products. All this is causing a deep trouble for steel
industry. Unemployment on the other hand is responsible for low economic growth; loss
of production and output because those who are unemployed are not able to add towards
GDP. On the positive side, considering the present position of India’s steel industry it is
quite clear that India has the potential to become global steel player. Huge iron ore
reserve is the greatest advantage to the industry. Industry just need to utilize its expertise
and should try to exploit the resources it has. Export opportunities are increasing as some
of the steel producers in India are the most efficient producer of steel at world level and
as global competition is increasing only the efficient players can survive in it.
Government’s positive support, such as formation of SEZ and relaxation in taxes, is also
helping industry to grow rapidly.

39


6. References:-

1. Ministry of Steel (India) website
2. competition commission of India website
3. Indian Business Equity Foundation website
4. SAIL Annual Report
5. TATA Steel Annual Report
6. Economic survey and IIT-R e-library.

40

Indian Steel Industry

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (7)

Similar to Indian Steel Industry

Similar to Indian Steel Industry (20)

Indian Steel Industry