1.

Introduction to Indian Steel Industry

Iron and steel form the backbone of any industrialised society. They are vital for India’s national security
and economic well-being. Iron and steel has no practical substitutes that can be used on a large scale as it is
relatively cheaper compared to other alternative materials. An iron and steel industry comprises steel mills, iron
and steel foundries, and the suppliers of ferrous scrap and iron ore. Iron ore mines provide the major raw
material from which iron and steel products are made. Iron and steel scrap raw materials are collected and
distributed by brokers, collectors, and dealers in the ferrous scrap industry to steel mills and foundries.

The Indian steel industry ranks fifth in the world with crude steel production of 55.1 mT in calendar year (CY)
2008. The share of India in global crude steel production has increased from 3% in 1998 to 4.1% in 2008. As a
consuming market, India presents a high growth potential with a low annual per capita finished steel
consumption of 42 kg, as compared with 311 kg in China.

At the time of independence in 1947, India had only three steel plants - the Tata Iron & Steel Company,
the Indian Iron and Steel Company and Visveswaraya Iron & Steel Ltd and a few electric arc furnace-based
plants. The period till 1947 thus witnessed a small but viable steel industry in the country, which operated with a
capacity of about 1 million tonne and was completely in the private sector. From the fledgling one million tonne
capacity status at the time of independence, India has now risen to be the 5th largest crude steel producer in the
world and the largest producer of sponge iron. As per official estimates, the Iron and Steel Industry contributes
around 2 per cent of the Gross Domestic Product (GDP) and its weight in the Index of Industrial Production
(IIP) is 6.2 per cent. From a negligible global presence, the Indian steel industry is now globally acknowledged
for its product quality. As it traversed its long history during the past 61years, the Indian steel industry has
responded to the challenges of the highs and lows of business cycles. The first major change came during the
first three Five-Year Plans (1952-1970) when in line with the economic order of the day, the
iron and steel industry was earmarked for state control. From the mid-50s to the early 1970s, the Government of
India set up large integrated steel plants in the public sector at Bhilai, Durgapur, Rourkela and Bokaro.

The large-scale capacity creation in the public sector during these years contributed to making India the
10th largest steel producer in the world as crude steel production grew markedly to nearly 15 million tonne in
the span of a decade from a mere 1 million tonne in 1947. But the trend could not be sustained from the late
1970's onwards, as the economic slowdown adversely affected the pace of growth of the Indian Steel Industry.
However, this phase was reversed in 1991-92, when the country replaced the control regime by liberalisation
and deregulation in the context of globalisation.

. With the opening up of the economy in 1992, the country experienced rapid growth in steel making capacity.
Large integrated steel plants were set up in the Private Sector by Essar Steel, Ispat Industries, Jindal Group etc.
Tata Steel also expanded its capacity.

After 1996-97, with the steady decline in the domestic economy's growth rate, the Indian steel industry's
pace of growth slowed down and in terms of all the performance indicators - capacity creation, production,
consumption, exports and price/ profitability - the performance of the industry fell below average. In foreign
trade, Indian steel was also subjected to anti-dumping/ safeguard duties as most developed economies invoked
non-tariff barriers. Economic devastation caused by the Asian financial crisis, slowdown of the global economy
and the impact of glut created by additional supplies from the newly steel-active countries (the steel-surplus
economies of erstwhile USSR) were the factors that pulled down growth levels.
However, from the year 2002, the global industry turned around, helped to a great extent by China, whose
spectacular economic growth and rapidly-expanding infrastructure led to soaring demand for steel, which its
domestic supply could not meet. At the same time, recoveries in major markets took place, reflected by increase
in production, recovery of prices, return of profitability, emergence of new markets, lifting of trade barriers and
finally, rise in steel demand - globally. The situation was no different for the Indian steel industry, which by
now had acquired a degree of maturity, with emphasis on intensive R&D activities, adoption of measures to
increase domestic per capita steel consumption and other market development projects, import substitution
measures, thrust on export promotion and exploring global avenues to fulfil input requirements.
 The rapid pace of growth of the industry and the observed market trends called for certain guidelines
and framework. Thus was born the concept of the National Steel Policy, with the aim to provide a roadmap of
growth and development for the Indian steel industry. The National Steel Policy (NSP) was announced in
November 2005 as a basic blueprint for the growth of a self-reliant and globally competitive steel sector. The
long-term objective of the National Steel Policy is to ensure that India has a modern and efficient steel industry
of world standards, catering to diversified steel demand. The focus of the policy is to attain levels of global
competitiveness in terms of global benchmarks of efficiency and productivity. The National Steel Policy seeks
to facilitate removal of procedural and policy bottlenecks that affect the availability of production inputs,
increased investment in research and development, and creation of road, railway and port infrastructure. The
Policy focuses on the domestic sector, but also envisages a steel industry growing faster than domestic
consumption, which will enable export opportunities to be realised.
Structure of Indian Steel Industry
Traditionally, Indian steel industry has been classified into

1. Main Producers (SAIL plants, Tata Steel and Vizag Steel/RINL),

2. Major Producers (plants with crude steel making capacity above 0.5 million tonne - Essar Steel, JSW
Steel, Jindal Steel & Power and Ispat Industries) and
3. Other Producers. The latter comprises of numerous steel making plants producing crude steel/finished
steel (long product/flat product)/ pig iron/ sponge iron and are spread across the different states of the
country.

Production, consumption and growth of steel

The National Steel Policy 2005 had projected consumption to grow at 7% based on a GDP growth rate
of 7-7.5% and production of 110 million tonne by 2019-20. These estimates will be largely exceeded and it has
been assessed that, on a 'most likely scenario' basis, the crude steel production capacity in the country by the
year 2011-12 will be nearly 124 million tonne.
The table below shows the trend in production for sale, import, export and consumption of total finished steel
(alloy + non-alloy) in the country:

Year Total finished steel (alloy + non-alloy) ('000 tonne)

Production for sale Import Export Consumption
2004-05 43513 2293 4705 36377
2005-06 46566 4305 4801 41433
2006-07 52529 4927 5242 46783
2007-08 56075 7029 5077 52125
2008-09 57164 5841 4437 52351
Apr-Dec 2009-10* 43849 5210 2099 40997
Source: JPC; * =Provisional

Crude steel production has shown a sustained rise since 2004-05 along with capacity. Data on crude
steel production, capacity and capacity utilization are given in the table below:

Year Crude steel

Capacity Production Capacity
('000 tonne) ('000 tonne) utilisation (%)
2004-05 47995 43437 91
2005-06 51171 46460 91
2006-07 56843 50817 89
2007-08 59845 53857 91
2008-09 66343 58437 88
Apr-Dec 2009-10* 72763** 45775 84
Source: JPC;*=Provisional; **6.42 million tonne capacity added during April-December 2009