India’s engine of growth needs doubling of production
T HE Indian steel industry is marking a centenary of production with plans to spend about $ 60 billion on more than doubling its output over the next five years. Indian Steel Minister Ram Vilas Paswan last month released a review showing that production has increased from almost 35 million tonnes a year in 2002- 03 to 54 million tonnes in 2007- 08 — and proposing that capacity be pushed up to 124 million tonnes annually by 2012.
India is already the world’s seventh- largest steel producing nation. These and longer- term plans should see investment in the Indian steel industry exceed $ US200 billion by 2020, Paswan added, reporting that memoranda of understanding agreed between producers and state governments covered a proposed investment of $ US120 billion to deliver capacity of more than 240 million tonnes.
The Indian industry has made massive progress since its market was liberalised in 1992 — when output was less than 20 million tonnes a year — after being tightly controlled by government since 1907. The Indian Steel Alliance, representing manufacturers, says the industry has adopted world- class technology, is producing high- quality product and has successfully integrated with the global market.
While the industry has become a net exporter this decade, the alliance points out that there is huge scope for increased delivery to the domestic market — Indian per capita steel production is only 35kg compared with a world average of 150kg and a Chinese average of 300kg. Development of India’s power generation, petrochemical and fertiliser industries, along with large- scale urban construc- tion, is expected to give substantial impetus to the domestic steel market. At the same time, Indian steel makers are encouraged to build capacity by consultants’ forecasts that global demand will rise 71 per cent between 2007 and 2017.
While the Indian government is pleased to talk up the potential for domestic steel manufacturing, it is also wrestling with of substantial policy hurdles. It is pressuring producers to bring down prices to help it to control national inflation while consumers are angry that domestic prices are more than double those offered to overseas customers.
While India has large reserves of iron ore, the sixth- biggest in the world — and earning more than $ 4 billion a year from exports, mainly to China — its substantial coal resource is of poor quality. Large- scale expansion in steel making will require significant increases in metallurgical coal imports.
There are major defects in the railway transportation system, and some substantial iron ore mining and steel project proposals are creating problems between the government and local communities over land requisition.