In­dia’s en­gine of growth needs dou­bling of pro­duc­tion

The Weekend Australian - Review - - Steel -

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.

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