The Indian steel industry, which was riding the commodities boom over
the past four years, is currently grappling with slowing sales in international
markets and weak demand locally. Is it prompting lenders to tighten credit disbursals?
Steel consumption is closely related to the growth of the economy. The demand
for steel in India continues to be strong and growing. Also, the government of
India has increased the import duty on HRC steel from 5 per cent to 7.5 per cent,
which offers protection to domestic industry from dumping from international markets
and provided stability to domestic prices.
Likewise, the increase in export duty on iron ore fines from 20 per cent to 30
per cent has indrease availability of iron ore fines for domestic industry at
The RBI and Government of India are taking steps to improve India liquidity in
the economy to sustain the growth in the economy. We do not see any move from
lenders to restrict credit disbursals, which would be counterproductive. However,
considering the stage of global economy, not much new investments are being planned
in the steel industry this moment. In spite of economic slowdown globally, the steel sector has continues
to post robust growth. India produced 72.2 million tonnes of steel in 2011. What
are your expectations until 2017, the end of the 12th plan?
We are bullish on the growth story of steel in India. That there is going to be
an increasing demand for steel in the coming years is quite clear. Investment
worth $1trillion is planned in infrastructure alone during the 12th Plan period
and steel would be a key commodity for this.
D.R.S Chaudhary, the new steel secretary, has stated that the steel sector would
grow at 10 per cent per annum and that the government would ensure that the enablers
are in place for this to happen. Steel producers have already announced capacity
expansions to meet the burgeoning demand.
However, clarity in government policies and their execution in spirit will play
the defining role. The challenges are the land acquisition issues being faced
by all steel majors for capacity expansions, allotment of mining leases, transparent
and straight-forward mining sector regulation, and streamlined forest and environmental clearance mechanism. The government and the industry need to work closely together
to resolve such issues. What is needed for the growth of a self-reliant, globally competitive
steel sector in India?
We have communicated to the ministry on the various policy issues that need addressing
for the growth of a self-reliant steel sector in India. There is a need to focus
on the upstream end of steelmaking segment. Raw material availability at a competitive
cost will define long-term growth trajectory of steel. Hence, raw material linkages
in terms of mining leases are critically important for value adders like integrated
Delays in capacity expansion projects, which are a norm today, need to be controlled.
These delays generally arise because the prerequisites, before stating construction,
take a long time to materialise. Value addition o raw materials withing the country,
through processes such as beneficiation, should be encouraged.
Also, to encourage use of low quality iron, there should be a differential royalty
regime, meaning that royalty should be lower on iron fines which are low quality
coal and iron ore, which the government should facilitate actively. Cost of production of steel is skyrocketing with the unavailability of
raw materials including iron ore and coal.
It is true that steel producers are facing cost pressures due to rising material
costs. However, we need to devise innovative ways to deal with it. Using alternative
technology can help. For example, at Essar Steel, we are planning to beneficiate
low grade iron ore fines in Odisha, which are available at a lower price, and
increase the iron content so that it can be used economically in our iron making
Similarly, we have commissioned the Corex modules that use non coking coal directly,
so the dependence on high priced coking coal / coke is reduced. What are your expectations from the new National Steel Policy?
We are looking forward to the new National Steel Policy. We expect that the new
policy will remove or clarify the existing policy bottleneck and spur steel production
in India. We hope that the challenges, as outlined earlier, will be adequately
addressed through appropriate policy formulations.
The MMDR Bill, 2011 is an important step in changing the mining landscape and
spur investments in India. Considerations such as royalty issue, seamlessness
in moving from ones form of concession to the next, guarantee of security of tenure,
transferability of concessions, and prompt disposal of applications need to be
addressed on priority for an efficient act. Are Chinese companies tough competitors for you?
Availability of cheap imports is a matter of concern. The government should take
appropriate fiscal measures to safeguard the interests o the industry. A level
playing field should be ensured. India should not be made a dumping ground for