The Indian steel sector
The steel sector in India was de-regulated in 1991-92 when controls on capacity and prices were abolished along with the quantitative trade restrictions. Import tariffs were also brought down substantially and the Government focused on removing the bottlenecks in supply of inputs such as iron ore and coal, and to encourage self-reliance to meet the demand for steel in the country. Post-1992 there was substantial capacity addition in the domestic steel sector, the lead being taken by the private sector and secondary sector producers. The fortunes of domestic steel industry, which was globally integrated, were being affected by the cyclicity in the global steel market. In view of our inherent advantages and rising demand for steel, the growth prospect of the Indian steel sector appeared very bright. Hence, there was a need for the Government to clearly spell out a road map for the steel sector. The National Steel Policy(NSP) sets out a broad roadmap for the Indian steel industry in its journey towards reform, restructuring and globalisation. The long-term goal of the NSP is that India should have a modern and efficient steel industry of world standards, catering to diversified demand for steel. The focus of the policy is to achieve global competitiveness not only in terms of cost, quality and product-mix but also in terms of global benchmarks of efficiency and productivity. In order to achieve the goal of 110 million tonnes of steel production by 2019-20, the NSP seeks to remove the supply-side constraints to the growth of this industry in an open, globally-integrated and competitive environment.
The NSP seeks to adopt a multi-pronged strategy to move towards the long-term policy goal. On the demand side, the strategy would be to create incremental demand through promotional efforts, creation of awareness and strengthening the delivery chain, particularly in the rural areas. On the supply side, the strategy would be to facilitate creation of additional capacity, remove procedural and policy bottlenecks in the availability of inputs such as iron ore and coal, make higher investments in research and development (R&D) and encourage the creation of infrastructure such as roads, railways, and ports. The NSP acknowledges the low per capita consumption of steel in the country, especially in the rural areas and the need to boost steel consumption to improve the quality of life and help in meeting the growing aspirations of the people.
In order to achieve the strategic goal of 110 metric tonnes of steel production by 2019-20, the industry would need additional capital. In addition, funds would be required for technological upgradation of the existing facilities. In order to mobilize such vast resources, the NSP seeks to encourage foreign direct investment. In addition, the policy also seeks to make the fiscal incentives, available to infrastructure projects, accessible to the steel industry.
The NSP seeks to contain price volatility in the steel market. Its emphasis is on strengthening the existing training and research facilities available to the domestic steel industry to provide suitable training programmes, especially for the secondary small-scale units and also to collect and analyze data on important parameters of the industry.
The NSP seeks to mount aggressive R&D efforts to create manufacturing capability for special types of steel, substitute coking coal, use iron ore fines, develop new products suited to rural needs, enhance material and energy efficiency, utilize waste, and arrest environmental degradation.
The NSP acknowledges the important role played by the secondary steel sector in providing employment, meeting the local demand for steel in the rural and semi-urban areas, and meeting the country’s demand of some special products. It endeavours to provide the necessary feedstock to these units at reasonable prices from major plants through the existing mechanism of State Small Industries Corporations.
The NSP recognizes the fact that integration of the Indian steel industry with the global economy requires that the industry should be protected from unfair trade practices, common during downturn period. The NSP, therefore, envisages institution of mechanisms for import surveillance and monitoring export subsidies in other countries.
ACTION TAKEN SO FAR
In view of the buoyancy in the steel market in the last three years, entrepreneurs, both international and domestic, have expressed deep interest in the growth prospects of the Indian steel industry. In the three mineral-rich States of Orissa, Chhattisgarh and Jharkhand, 116 memorandums of understanding(MoUs) have been signed by the State Governments covering a proposed capacity of 146 million metric tonnes per annum of additional capacity with an investment of over Rs. 3.50 lakh crore.
Immediately after the announcement of the policy consultations were held with different sectors of the industry and the concerned State Governments, inviting feedback on formulating sector-specific action plans. The announcement of the steel policy has generated substantial interest in different sectors. Active consultations are going on with the State Governments for ascertaining the requirement of raw materials and infrastructure for the proposed growth plan in different States. The Ministry of Steel proposes to function as a nodal point for monitoring the progress made in the upcoming and proposed steel projects. On the issue of raw materials, mainly iron ore for the steel sector, the Government constituted a high-level committee under the Member (Industry), Planning Commission. The Anwarul Hoda Committee was tasked to review the National Mineral Policy and to recommend possible Amendments to the Mines and Mineral Development and Regulation Act, 1957. The Committee had extensive consultations with various interest groups, stakeholders and State Governments. Reports prepared and submitted by Study Groups and in-house committees set up by various Ministries from time to time on the issues before the Committee were also discussed. The Hoda Committee has since submitted its report and the matter is presently being examined by the Government. However, since positive action flowing from the recommendations of the Hoda Committee may take some time, the Ministry of Steel is also engaged in preparation of an appropriate action plan for meeting the country’s raw material requirement.
A long-term action plan for promoting consumption of steel has been drafted and comments of different stakeholders are presently being obtained. Efforts have also been made to amend the CPWD Code for promoting steel-intensive design for construction.
To strengthen the distribution network of steel companies, the Government has also instructed the public sector units of SAIL and the Rashtriya Ispat Nigam Limited (RINL) at Vizag to appoint district and sub-district level dealers covering the entire country. So far, SAIL has appointed 200 dealers in 97 districts. RINL has 40 dealers in 40 districts. In addition, 300 plus dealers are to be appointed by SAIL in the near future.
For ensuring raw material security many steel companies have started entering into joint ventures and equity participation with raw material companies abroad. PSUs are also actively engaged in this process.
The Ministry has set up the Steel Research and Development Mission (SRDM). Having full functional autonomy, it has been entrusted with the task of carrying out path-breaking research in the steel sector. The Ministry will support the mission for the first three years and thereafter it is expected to become self-sustaining.
For meeting the requirement of investments, the Government has identified several fiscal incentives for the steel sector which include further liberalization of External Commercial Borrowing (ECB) norms and various rationalizations/simplifications of the existing fiscal incentives. The matter will shortly be placed before the Committee of Secretaries.
Draft action plan for the refractory sector has been formulated and would soon be operational. Immediately after the announcement of the NSP a national seminar on “Rail Transportation Issues in the Steel Sector” was organized by the Ministry of Railways. Several issues were identified and work has been initiated. The announcement of a dedicated freight corridor during the railway budget 2006-07 was one such outcome. It is proposed to co-opt the Departments related with creation of infrastructure, including the railways, in the discussions with State Governments for identifying various bottlenecks and suggesting remedial measures.
A Task Force has been constituted under the chairmanship of the Member (AH), Planning Commission to formulate the financing plan for ports and making suitable recommendations to the Committee on Infrastructure. The requirement of port facility for steel and iron ore has been identified as a major area.
The Ministry of Steel has also commissioned several studies on specific issues which, inter-alia, include energy efficiency of the secondary steel sector along with remedial measures; the road map for promoting risk hedging instruments for absorbing price-related shocks; performance benchmarks of the industry in monitorable terms and all problems related to inefficient operation, pollution and sub-optimal utilization of resources.
Work on installing an import surveillance mechanism for online dissemination of import-related data on a day-to-day basis has been completed. The data is expected to be shortly available online to the industry.
Implementation of the National Steel Policy (NSP) in a systematic manner is the prime responsibility of the Ministry. The announcement of NSP, clearly laying down milestones and the future roadmap for the steel sector has inspired debates at different fora. The flow of inputs and suggestions has been overwhelming. This would facilitate the Government in formulating practical and workable action plans for different sectors of the domestic steel industry.
SMK/ls
(Release ID :20335)