Can Steel be India’s National Industry?
Posted : August 25, 2004 at 1:18 am [IST]
Recently TISCO has acquired the 2 million tones steel business of Singapore –based NatSteel for a sum of Rs 1,313 crore($286 million). NatSteel is a dominant steel producer with mills in China, Thailand, Vietnam, the Philippines and Australia and is mainly focused on long products. It is an important step of the company to build up a global business particularly for high growth markets of China and Southeast Asia. TISCO is also expanding its capacity at its mother plant at Jamshedpur and is also planning for a green manufacturing facility in Orissa. Tata Steel wants to take up its production from 4 million tonnes to 7.4 million tonnes.
Low costs have helped Indian steel companies export aggressively to new markets such as China. Almost every major steel company is sitting on plans to expand capacity. Steel Authority of India wants to increase production from 13 million tonnes to 20 million tonnes by 2012. South Korean major Posco Steel along with Australia’s mining major Billiton (BHP) are planning an investment of Rs 39,000 crore in a 10 million tonnes green-field steel project in Orissa.
As news goes, the government is likely to clamp down on exports of iron ore and pellets in a bid to augment the supply of raw materials to domestic steel producers at cheaper costs and promote export of value-added products instead of primary commodities. Is it only a patriotic move or is government t thinking to help steel industry to grow to world class level? Most of the exports are headed to China, which has been adding to its steel-making capacity with a break-neck speed. Why should we be aiding China achieve greater competitive strength in steel which could adversely affect India’s steel exports? India has a raw material advantage in iron ore which can make more value-added steel.
Is it a realistic move? Can India become a major player in steel sector? Will it be a globally competitive sector to go for? The table below shows how poor India is placed so far the capacity of steel sector is concerned.
| Region | 2003 | 2004 | % Change |
|---|---|---|---|
| EU | 108.2 | 113.8 | 5.2 |
| N. America | 72.9 | 76.2 | 4.5 |
| Asia | 241.2 | 269.6 | 11.8 |
| China | 121.3 | 146.7 | 21 |
| India | 18.2 | 18.5 | 1.9 |
As steel is highly capital intensive project, the government must adopt measures to make the investment viable. Area of attention for the government are development and improvement of infrastructure, making iron ore, gas and good quality coal available and ensuring consistent supply of power to the industry.
India is nowhere as on today if we consider competing countries, because of short term policy of the government. But with abundance of good iron ores- the main input for steel industry, steel can easily become a national industry for a prosperous India. Investments are to be encouraged to cut down the cost per ton of production and improving the quality. Taxes may be rationalized. Restriction on export must not be imposed as a measure to keep the prices down. Consumption of steel per capita in the country will increase with economy growing, as it did in China. Normally, per capita steel consumption in a country is an indicator of the country’s economic growth. Many plans are being talked about. Let us see where it takes us.
- Indra
Category: Industry/Management |
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