Indian steel industry plays a significant role in the country's economic growth. India has acquired a central position on the global steel map with its giant steel mills, acquisition of global scale capacities by players, continuous modernisation and up-gradation of old plants, improving energy efficiency, and backward integration into global raw material sources.
Currently, ranked the world's fourth largest crude steel capacity, India is expected to become the second largest producer of crude steel in the world by 2015-16. India is also the world's largest producer of sponge iron with a host of coal-based units located in its mineral-rich states.
India's steel making capacity is estimated to exceed 100 million tonnes (MT) by 2013 and the production is expected to reach 275 MT by 2020. The per capita steel consumption increased from 34 Kilograms (Kg) in 2004-05 to 59 kg in 2011-12.
The World Steel Association has estimated steel consumption in India to grow at five per cent in 2013. "Steel producers may see a spurt in demand in the medium term if the Indian Government implements its US$ 1 trillion infrastructure investment plan," as per India Ratings.
Indian crude steel production is estimated to grow at a compound annual growth rate (CAGR) of around 10 per cent during 2010-2013, whereas the finished steel consumption is estimated to grow at a CAGR of around 12 per cent during FY 2012-14, as per a RNCOS research report titled, 'Indian Steel Industry Outlook to 2012'.
Government Initiatives
India and Uruguay have signed a letter of intent (LoI) to explore investment opportunities in iron ore and steel sector. The visit of the Indian delegation was successful in establishing a firm base for mineral exploration and production by Indian firms in Uruguay.
India and Tanzania have signed an initial pact for forging an alliance to explore mineral wealth in the African nation. The two countries have also signed a LoI for strengthening cooperation in the area of steel and mining. "Tanzania has huge mineral resources which are yet to be fully developed. I believe there is a possibility of joint venture for Indian companies with mining entities in Tanzania," stated Mr Beni Prasad Verma, Union Steel Minister, Government of India, in an official press release.
Mr Beni Prasad Verma also led a delegation to Brazil to strengthen cooperation between the two countries in steel and mining and signed a LoI. The LoI aims to encourage investment opportunities in iron & steel related businesses by the Indian and the Brazilian companies in India and Brazil, facilitate exchange of technical know-how in developing the iron and steel production and other steel related raw materials.
Moreover, the Union Budget 2013-14 proposes to allow some institutions to issue tax free bonds worth Rs 500 billion (US$ 9.16 billion) maximum in 2013-14, strictly based on need and capacity to raise money in the market.
The main highlight of the Union Budget 2012-13 for the steel industry was the reduction of basic customs duty on plant and machinery imported for setting up or substantial expansion of iron ore pellet plants or iron-ore beneficiation plants from 7.5 per cent to 2.5 per cent, which remains unchanged for 2013-14. The other proposals related to the steel sector as per the Union Budget 2012-13 are as under:
- To reduce basic customs duty on
- Coating material for manufacturing of electrical steel from 7.5 per cent to 5 per cent
- Nickel ore and concentrate and nickel oxide/ hydroxide from 2.5 per cent or 7.5 per cent to nil
- To enhance export duty on chromium ore from Rs 3,000 (US$ 54.95) per tonne to 30 per cent ad valorem
- To enhance basic customs duty on non-alloy, flat-rolled steel from 5 per cent to 7.5 per cent
Some other initiatives taken by the Government include the following:
- 100 per cent foreign direct investment (FDI) through the automatic route is allowed in the sector
- Large infrastructure projects in public-private partnership (PPP) mode are being formed
- The Government is encouraging research and development (R&D) activities in the steel sector
- Reduced custom duty and other favourable measures
- The Government of India has framed the National Steel Policy (NSP) to encourage the steel industry to reach global benchmarks in terms of quality, cost and efficiency
Road Ahead
Indian steel production has grown strongly in the recent decades and is likely to continue to expand as domestic producers increase their capacity to meet anticipated demand.
The biggest opportunity before steel industry in India is the enormous scope for increasing consumption of steel in almost all sectors, especially the rural sector which remains fairly unexposed to the multi-faceted use of steel.
A roadmap for R&D for steel industry has also been finalised and will be adopted with a special focus on beneficiation, coal ash reduction and promotion of production of high-grade value added steel in the country. Similarly, majority of Indian steel industry, in private sector, has also shown keenness to adopt latest technologies to make existing steel manufacturing processes more efficient and productive, as per Mr Beni Prasad Verma, Union Minister of Steel, Government of India.
Exchange Rate Used: INR 1 = 0.01832 as on April 9, 2013
References: RNCOS Report, Media Reports, Ministry of Steel, Press Information Bureau (PIB)