Steel Industry

Soon after taking charge of the Ministry of Steel, Virbhadra Singh, Minister of Steel, interacted with representatives from the steel industry and took steps to implement some of their demands. Singh set the steel industry on the growth path with significant growth in production

At a time when the statistics show a much lower per capita steel consumption in the country, what is your assessment of the steel sector in India?
A low per capita consumption only indicates the future demand potential. As you know, steel demand in the country is pegged to the gross domestic product and its increase is also similarly linked to growth in GDP. What we are most interested is in improving the availability of steel in order to cater to the growing steel demand in the country. Per capita steel consumption will automatically improve as steel demand grows and also the supply is ensured to fulfill the demand.

We are also interested in improving the general steel consumption through innovative design, technological and product based solutions. There are a number of areas, where steel usage is cost economical and can provide a better solution. These areas range from architectural buildings, airports, railway station, flyovers, roads, etc. to rural housing and household applications. One of our objectives is to identify and promote innovative applications of steel in engineering, architecture, construction and household applications.

How do you look forward to sector’s growth in terms of demand and consumption over the next few years?
Over the last five years, between 2004-05 and 2008-09, steel consumption growth in the country has been 9.6 per cent per annum. Earlier, the National Steel Policy 2005 had estimated an average consumption growth of 6.9 per cent. Then in 2007-08, the steel consumption growth in the country has touched a figure of nearly 13 per cent. I believe that the average growth of steel consumption in the country, for the next five years, can be estimated to be higher than 10 per cent per annum.[PAGE BREAK]

How do you think that the country’s annual steel production target of 124 million tones can be achieved by 2012?
We have realistically projected a steel capacity of nearly 120 million tones in country by December 2012. Nearly 36 million tones of brownfield capacity additional projects are going on as per schedule. Apart from this, a number of small and medium units in the secondary sector are also coming up fast. Except one or two Greenfield projects, we are expecting all other steel capacity projects, as envisaged, will be on stream by December 2012.

With the present production at 55-60 million tones, the Indian steel sector is the fifth largest in the world, much behind China’s 500-million-tonne sector. How do you see China’s role as the potential challenge to India?
The present steel capacity in the country is nearly 65 million tonnes. In terms of current rate of demand growth, the steel requirement in the country would double within five to six years. Therefore, we must double our capacity within two years to fulfill the domestic demand. Also, once our steel production capacity is at a comfortable level, we will certainly aim at quality and competitiveness of our steel products on a par with the best global standards. We are continuously watchful towards sustenance of our steel industry and take appropriate steps, whenever, required to maintain a healthy growth of the steel sector in India.

Now coming on China, we need to understand that every economy has its own requirements depending upon its supply, demand, capacity and most importantly the phase of economic cycle it is passing through. After China, our steel industry is the second fastest growing sector in the world in terms of demand and production. We have become the third largest steel producer in the year 2009, from being the seventh largest three to four years back. We have great potential for economic growth and currently our main concern is to synergise all available resources to facilitate the production and capacity building to meet the future steel requirement in the country.

What’s your opinion on export of iron ore to other country? Don’t you think that an increase in export duty on iron ore will help the domestic sector to conserve it for long-term utilization?
We are of the view that the precious raw material like iron ore is non-renewable natural resource and should be conserved for long-term utilization of domestic steel industry. We are regularly taking up the issue with Ministry of Finance for imposition of appropriate export duty on iron ore to discourage its export. As a result of our efforts, export duty on iron ore lumps has been increased recently from 10 per cent to 15 per cent ad valorem. We feel that to effectively discourage export of iron ore, we further need to increase export duty on iron ore to at least 20 per cent ad valorem on all varieties of iron ore.

In my opinion, I feel that the government should impose a ban on exports of iron ore. Others may differ on this issue, but we should see what United States and China are doing to conserve their resource of iron ore and oil in that order. [PAGE BREAK]

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Several international companies like ArcelorMittal and Posco have delayed their projects due to some government’s regulatory hurdles. What’s your opinion on this and how do you plan to solve the issue?
Some of the greenfield projects have affected by the issue of land acquisition. We are hopeful that there will be a political consensus with regard to land acquisition and R&R policy. It is a key issue not only for steel industry and infrastructure development in general. We are hopeful of a solution.

There is no regulatory hurdle on Posco, ArcelorMittal or any other entrepreneur planning to set up steel plants in the country. There are certain procedural formalities and critical requirements, especially for the greenfield projects. Since ArcellorMittal and Posco are high capacity steel proposals with a much larger level of integration, there are certain delays. But I am sure all the hurdles will be gradually overcome and these Greenfield will commence their executions soon. At the ministry level, we have constituted an inter-ministerial group, headed by Secretary, Steel with representatives from the concerned central ministries / departments and state governments, where major steel projects are located. This group has been actively monitoring and coordinating on all impeding issues and the infrastructure requirements of the upcoming steel projects.

Rising prices have become a vital issue today, how do you plan to check steel prices from escalating?
I keep a very close watch on prices. The recent spurt in prices has not been a happy development. In my view that was not warranted. We organised a meeting with major steel producers of the country to see that there is no speculative increase in prices. The results are for everyone to see as steel prices have fallen by 5 to 10 per cent after the meeting. In a deregulated market, the prices are determined by the interplay of market forces. The current rise in price of steel is attributable to increase in price of steel making inputs one hand and strong domestic demand for steel on the other hand. Government through various policy measures tries to maintain stability in terms of price and availability. For instance, the import duty on steel has been reduced over the years and currently stands at the lowest slab of 5 per cent. The import duty on melting scrap has been brought down to nil. Similarly, the general excise duty rate has been reduced to 10 per cent which will also help in checking the rise in price of steel.