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Saturday, December 29, 2007

2007...Steel production expected to touch 55.5 mn tons in FY08


Led by robust domestic demand the steel sector in the country has been witnessing extraordinary growth, making India the fifth largest crude steel producer in the world as against 8th position held three years back. Production of finished carbon has increased from 35.41 million tonnes in 2002-03 to 49.58 million tonnes in 2006 -07. During the first seven months of the current year from April to October 07, production of finished carbon is estimated to be about 29.37 million tonnes and is expected to be 55.5 million tonnes in FY 08. While exports have remained fairly stable between 2002-03 until last year at around 4.5 million tonnes, imports have increased from 1.51 million tonnes in 2002-03 to 4.10 million tonnes maintaining a rising trend this year, largely to fill the demand supply gap in the domestic market.

The demand for steel is expected to remain buoyant, above 10 per cent over the next five years, and in the most likely scenario the steel production capacity in the country is expected to touch 124 million tonnes by 2012. While the brownfield expansion plan over the next five years is expected to add 40.5 million tonnes capacity to the existing capacity of 56.84 million tonnes, the most likely scenario for addition to capacity by setting up of greenfield projects is expected to be 28.72 million tonnes taking the total capacity to 124.06 million tonnes. Furthermore, taking into consideration the intentions expressed by various steel investors including multinationals, domestic steel majors and FDIs, the likely capacity achievable by 2019-20 will be around 275 million tonnes.

The Public Sector Undertakings, Steel Authority of India Limited (SAIL) and Rashtriya Ispat Nigam Limited (RINL), are in the midst of ambitious expansion plans. The expansion plan would increase the capacity of SAIL from 14.6 million tonnes of hot metal to 26 million tonnes by 2010 at an estimated cost of around Rs. 53,000 crore. SAIL is also planning to expand its capacity further to 60 million tonnes per annum by 2020. In case of RINL, the expansion would increase its capacity from the present level of 3 million tonnes of hot metal to 6.3 million tonnes by 2009-10 at an estimated cost of around Rs.9,000 crore. RINL also plans to enhance capacity to 16 million tonnes per annum by 2020.

An MOU was signed between SAIL, RINL and NMDC this year for setting up a 4 million tonnes steel plant in Chhattisgarh. MECON has been appointed as consultant to prepare the site selection and economic feasibility report by April 2008. In a major move for implementing the project a tripartite MOU was signed between the Railway Ministry, Chhatisgarh Government and SAIL and NMDC for laying a 235 kilometer railway link between Dalli- Rajhara and Rowghat and further to Jagdalpur.

Acquisition of coking coal mines
In the wake of major expansion/investment plan, securing raw materials has been a major concern. By 2020, about 70 million tonnes of coking coal will be required of which 85 per cent will have to be imported. SAIL, RINL, Coal India Limited, NTPC and National Mineral Development Corporation signed a MOU in August this year to jointly promote a Special Purpose Vehicle for acquisition of coal mines/properties abroad. The union cabinet has approved the proposal of the Steel Ministry in November 2007.

Major initiatives of the Steel Ministry
With a view to facilitate speedy actualization of major steel investments in the country, the Prime Minister has approved the constitution of an Inter Ministerial Group to monitor and coordinate issues concerning major steel investments in the country. The IMG is chaired by Secretary, Steel with Secretaries of DIPP, Mines, Environment and Forest, Road Transport and Highways, Shipping, Member (Traffic), Railway Board and Chief Secretaries of concerned State Governments as its members. The broad terms of reference of the IMG are to review and coordinate measures for early completion of major steel capacities and to address various problems concerning infrastructure, availability of raw materials, speedy environment clearance, availability of other resources such as land and water and issues concerning rehabilitation.

A coordination committee consisting of representatives of steel industry, Ministry of Steel and Railway Board has been constituted to identify the major bottlenecks in railway facilities to steel sector. The Ministry of Steel has also commissioned a study with the Economic Research Unit to assess the infrastructure deficiencies and requirements in the major steel producing areas, particularly Orissa, Jharkhand and Chhatisgarh.

In order to make available quality steel to the consumers, it has been made mandatory for the producers and distributors to obtain quality certification under the Bureau of Indian Standards Act. The notification issued in November this year comes into force after a period of six months from the date of the notification. The notification applies to 17 steel products used in housing and construction, plates used in pressure vessel and Boilers, electrical sheets for transformers and Motors, galvanized sheets for roofing and paneling, tinplates used for packaging of food products etc. All manufacturers of the 17 steel products covered under this order will have to apply for license from the Bureau of Indian Standards for the use of the ISI mark within 45 days of the publication of the order. Any violation of the order will attract punitive action which includes jail terms upto one year and fine. This will go a long way in making available critical steel products of certified quality to consumers.

In a move to increase the use of lower grade iron ore, the Ministry of steel organized an international seminar with participation of about 200 experts from home and abroad. The objective was to use such ore by beneficiating the same and also to maximize the use of iron ore fines by pelletisation. The seminar which evoked considerable interest is expected to lead to addition of substantial green field capacity for producing pellets based on iron ore fines.

To ensure transparency in functioning, the vigilance machinery in PSUs has been strengthened as SAIL, RINL, NMDC, MECON, KIOCL, HSCL, BRL, MOIL have obtained ISO 9001- 2000 certification. During this year all the PSUs under the Ministry have implemented Integrity Pact. The Pact is considered an International best practice from Transparency International, for improving fairness and transparency in procurement and contracts with bidders/vendors for all major purchases.

Since its deregulation in 1991, the steel sector in the country is free to decide on its domestic and export prices. Following a demand from the steel consumers in the National Steel Consumers Council Meeting a Steel Price Monitoring Committee was formed with both officials and representatives from Steel industry and Steel consumers as its members. The Committee besides monitoring prices also advises the industry to decide their product mix as well as long term capacity additions, keeping in view the demand growth in long products. Producers were also advised to keep the ex-factory prices of long products in check and to maintain their export balance vis-à-vis the domestic demands for steel.

Both SAIL and RINL are expanding their dealership network to ensure availability of commonly used items of steel in rural areas. While SAIL has nearly 1300 dealers covering 602 districts across the country, RINL has dealers in 131 districts.

Corporate Social Responsibility (CSR)
All profitable Steel PSUs are committed to the cause of CSR and have earmarked 2 per cent of their distributable profits for CSR activities. The total budget is about Rs. 230 crore. They have contributed to flood relief measures. SAIL alone has organized 153 health camps during April – September 07 in six states of Bihar, Jharkhand, Chhatisgarh, Orissa, West Bengal and Tamil Nadu. All the major PSUs have been urged by the Steel Ministry to adopt villages around their plant and help develop these villages as model villages.