M.V.S. Prasad, Joint Director, PIB, Chennai
At the time of Independence in 1947, India had only three steel plants – the Tata Iron & Steel Company (Jamshedpur), the Indian Iron and Steel Company (Burnpur) and Visveswaraya Iron & Steel Ltd (Bhadravathi), besides a few electric arc furnace-based plants. The period till 1947 thus witnessed a small but viable steel industry in the country, which operated with a capacity of about one million tonne and was completely in the private sector.
From the fledgling one million tonne capacity status at the time of Independence, India has now risen to be the 4th largest crude steel producer in the world and the largest producer of sponge iron. The Indian steel industry is now globally acknowledged for its product quality. During the first three Five-Year Plans (1952-1970), in line with the economic order of the day, iron and steel industry was earmarked for state control. From the mid-50s to the early 1970s, the Government set up large integrated steel plants in the public sector at Bhilai, Durgapur, Rourkela and Bokaro. The policy regime governing the industry during these years involved licensing of capacity, dual-pricing system and control of imports and exports.
Globalisation Benefits Industry
The large-scale capacity creation in the public sector during these years contributed to making India the 10th largest steel producer in the world. Crude steel production grew markedly to nearly 15 million tonnes in the span of a decade. Economic slowdown adversely affected the pace of growth of the steel industry. However, this phase was reversed in 1991-92 with the advent of globalization and opening up of our economy. Control regime was replaced by liberalisation and deregulation. The provisions of the New Economic Policy initiated in the early 1990’s impacted the Indian steel industry in many ways.
Large-scale capacities were removed from the list of industries reserved for the public sector. The licensing requirement for additional capacities was also withdrawn subject to locational restrictions. Private sector came to play a prominent role in the overall set-up. Pricing and distribution control mechanisms were discontinued. Iron and steel industry was included in the high priority list for foreign investment, implying automatic approval for foreign equity participation up to 50%. Freight equalisation scheme was replaced by a system of freight ceiling. While export restrictions were withdrawn, quantitative import restrictions were largely removed.
The system, thereafter, underwent rapid changes. For steel makers, opening up of the economy opened up new channels of procuring their inputs at competitive rates from overseas markets and also new markets for their products. It also led to greater access to information on global operations/techniques in manufacturing. This, along with the pressures of a competitive global market, increased the need to enhance efficiency levels so as to become internationally competitive. The consumer, on the other hand, was now able to choose items from an array of goods, be it indigenously manufactured or imported. This freedom to choose established the sovereignty of the consumer and galvanised steel producers to provide products/service levels in tune with the needs of the consumers.
Slow-down & Turnaround
Large integrated steel plants were set up in the Private Sector while the already existing plants expanded their capacity. This has resulted in the emergence of private sector with the creation of around 9 million tonnes of steel capacity based on state-of-the-art technology. Tariff barriers were either reduced or dismantled while partial float of the rupee on trade account, access to best-practice of global technologies and consequent reduction in costs – all these enhanced the international competitiveness of Indian steel in the world export market.
After 1996-97, the Indian steel industry’s pace of growth slowed down with the steady decline in the domestic economy’s growth rate. Production, consumption and, exports fell below average. Indian steel was also subjected to anti-dumping/ safeguard duties as most developed economies invoked non-tariff barriers. Economic devastation caused by the slowdown of the global economy, Asian financial crisis and the impact of glut created by additional supplies from the newly steel-surplus countries pulled down growth levels.
However, from the year 2002, the global industry turned around. The situation was no different for the Indian steel industry, which by now had acquired a degree of maturity, with emphasis on intensive R&D activities, adoption of measures to increase domestic per capita steel consumption and other market development projects, import substitution measures and thrust on export promotion.
National Steel Policy
The rapid pace of growth of the industry and market trends called for certain guidelines and framework. Thus was born the concept of the National Steel Policy, with the aim to provide a roadmap of growth and development for the Indian steel industry.
The National Steel Policy (NSP) was announced in November 2005 as a basic blueprint for the growth of a self-reliant and globally competitive steel sector. The long-term objective of this policy is to ensure that India has a modern and efficient steel industry of world standards, catering to diversified steel demand. The focus of the policy was to attain levels of global competitiveness in terms of global benchmarks of efficiency and productivity.
The policy sought to facilitate removal of procedural and policy, increased investment in research and development, and creation of road, railway and port infrastructure. It also focused on the domestic sector, but also envisaged a steel industry growing faster than domestic consumption, to enable export opportunities to be realised.
Sponge & Pig Iron
India is also a leading producer of sponge iron with a host of coal based units, located in the mineral-rich states of the country. Over the years, the coal based route has emerged as a key contributor and accounted for 75 per cent of total sponge iron production in the country. India is also an important producer of pig iron. Post-liberalisation, with setting up several units in the private sector, not only imports have drastically reduced but also India has turned out to be a net exporter of pig iron. The private sector accounted for 91 per cent of total production for sale of pig iron in the country in 2011-12.
Besides achieving the rank of the 4th largest global crude steel producer in 2012, India has also made a mark globally in the production of sponge iron/direct reduced iron (DRI). Thanks to mushrooming growth of coal-based sponge iron units, domestic production of sponge iron increased rapidly, enabling the country to achieve and maintain the number one position in the global market. With a series of mega projects and the domestic economy carrying forward the reform process further, the future of Indian steel industry is definitely optimistic. A new ‘Steel Vision’ for the next 20 years is also under finalization. (PIB Features.) With inputs from the Ministry of Steel.
Read more / Original news source: http://manipur-mail.com/steel-vision/
