Sector structure/Market size
The steel industry in India has been moving from strength to strength and according to the Annual Report 2009-10 by the Ministry of Steel, India has emerged as the fifth largest producer of steel in the world and is likely to become the second largest producer of crude steel by 2015-16.
Recently, Steel Minister, Mr Virbhadra Singh said that India will become the world's second-largest steel producer by 2012, more than doubling its capacity to 124 million tonnes (MT) as part of the push being given to assist overall infrastructure development.
Steel production rose 4.2 per cent to reach 60 MT in 2009-2010, according to the Ministry of Steel.
The National Steel Policy 2005 had projected an annual steel consumption growth of 7 per cent based on GDP growth rate of 7-7.5 per cent and production of 110 MT of crude steel by 2019-2020. Nonetheless, with the current rate of ongoing greenfield and brownfield projects, the Ministry of Steel has projected that these growth trends are likely to be exceeded and it is envisaged that in the next five years demand will grow at higher annual average growth rate of over 10 per cent as compared to around 7 per cent growth achieved between 1991-92 and 2005-06.
Moreover, according to the ministry, the crude steel production capacity in the country by 2011-12 will be nearly 124 MT.
According to the Ministry of Steel, 222 memorandum of understanding (MoUs) have been signed with various states for planned capacity of around 276 MT. Major investment plans are in Orissa, Jharkhand, Chattisgarh, West Bengal, Karnataka, Gujarat and Maharashtra.
According to the Annual Report 2009-10 by the Ministry of Steel, domestic crude steel production grew at a compounded annual growth rate of 8.6 per cent during 2004-05 and 2008-09.
India's steel consumption rose 8 per cent in the year ended March 2010, over the same period a year ago on account of improved demand from sectors like automobile, infrastructure and housing. The country’s steel consumption increased to 56.3 MT in the 12 months to March 2010 from 52.3 MT in the previous year, as per the Ministry of Steel.
A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments.
The domestic steel sector has attracted a staggering investment of about US$ 238 billion, according to the Minister of State for Steel, Mr A. Sai Prathap.
This consists of nearly 222 MoUs signed between the investors and various state governments mostly in the states of Orissa, Jharkhand, Chhattisgarh and West Bengal.
As per the Press Information Bureau, during 2009, the government took a number of fiscal and administrative steps to contain steel prices. Central value added tax (CENVAT) on steel items was reduced from 14 per cent to 10 per cent with effect from February 2009.
Moreover, in the Union Budget 2010-11, the government has allocated US$ 37.4 billion to the infrastructure sector and has increased the allocation for road transport by 13 per cent to US$ 4.3 billion which will further promote the steel industry.
Exchange rate used:
1 USD = 46.36 INR (as on February 2010)
1 USD = 44.42 INR (as on April 2010)