‘Steel’ Vision
At the time of Independence in 1947, India had only three steel
plants – the Tata Iron & Steel Company (Jamshedpur), the Indian Iron and
Steel Company (Burnpur) and Visveswaraya Iron & Steel Ltd (Bhadravathi),
besides 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 one 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 4th largest crude
steel producer in the world and the largest producer of sponge iron. The Indian
steel industry is now globally acknowledged for its product quality. During the
first three Five-Year Plans (1952-1970), in line with the
economic order of the day, iron and steel industry was earmarked for
state control. From the mid-50s to the early 1970s, the Government set up large
integrated steel plants in the public sector at Bhilai, Durgapur, Rourkela
and Bokaro. The policy regime governing the industry during these years
involved licensing of capacity, dual-pricing system and control of imports and
exports.
Globalisation Benefits Industry
The large-scale capacity creation in the public sector during
these years contributed to making India the 10th largest steel producer in the
world. Crude steel production grew markedly to nearly 15 million tonnes in
the span of a decade. Economic slowdown adversely affected the pace of growth
of the steel industry. However, this phase was reversed in 1991-92 with the
advent of globalization and opening up of our economy. Control regime was
replaced by liberalisation and deregulation. The provisions of the New
Economic Policy initiated in the early 1990’s impacted the Indian steel
industry in many ways.
Large-scale capacities were removed from the list of
industries reserved for the public sector. The licensing requirement for
additional capacities was also withdrawn subject to locational restrictions.
Private sector came to play a prominent role in the overall set-up. Pricing and
distribution control mechanisms were discontinued. Iron and steel industry was
included in the high priority list for foreign investment, implying automatic
approval for foreign equity participation up to 50%. Freight equalisationscheme
was replaced by a system of freight ceiling. While export restrictions were
withdrawn, quantitative import restrictions were largely
removed.
The system, thereafter, underwent rapid changes. For steel
makers, opening up of the economy opened up new channels of procuring their
inputs at competitive rates from overseas markets and also new markets for
their products. It also led to greater access to information on global
operations/techniques in manufacturing. This, along with the pressures of a
competitive global market, increased the need to enhance efficiency levels so
as to become internationally competitive. The consumer, on the other hand, was
now able to choose items from an array of goods, be it indigenously
manufactured or imported. This freedom to choose established the sovereignty of
the consumer and galvanised steel producers to provide
products/service levels in tune with the needs of the consumers.
Slow-down & Turnaround
Large integrated steel plants were set up in the Private Sector
while the already existing plants expanded their capacity. This has resulted in
the emergence of private sector with the creation of around 9 million tonnes of
steel capacity based on state-of-the-art technology. Tariff barriers were
either reduced or dismantled while partial float of the rupee on trade account,
access to best-practice of global technologies and consequent reduction in
costs – all these enhanced the international competitiveness of Indian steel in
the world export market.
After 1996-97, the Indian steel industry’s pace of growth slowed
down with the steady decline in the domestic economy’s growth rate. Production,
consumption and, exports fell below average. Indian steel was also subjected to
anti-dumping/ safeguard duties as most developed economies invoked non-tariff
barriers. Economic devastation caused by the slowdown of the global economy,
Asian financial crisis and the impact of glut created by additional supplies
from the newly steel-surplus countries pulled down growth levels.
However, from the year 2002, the global industry turned around.
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 and thrust on
export promotion.
National Steel Policy
The rapid pace of growth of the industry and 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 this 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 was to attain levels of
global competitiveness in terms of global benchmarks of efficiency and
productivity.
The policy sought to facilitate removal of procedural and policy,
increased investment in research and development, and creation of road, railway
and port infrastructure. It also focused on the domestic sector, but also
envisaged a steel industry growing faster than domestic consumption, to enable
export opportunities to be realised.
Sponge & Pig Iron
India is also a leading producer of sponge iron with a host of
coal based units, located in the mineral-rich states of the country. Over the
years, the coal based route has emerged as a key contributor and accounted for
75 per cent of total sponge iron production in the country. India is
also an important producer of pig iron. Post-liberalisation,
with setting up several units in the private sector, not only imports have
drastically reduced but also India has turned out to be a net exporter of pig
iron. The private sector accounted for 91 per cent of total production for sale
of pig iron in the country in 2011-12.
Besides achieving the rank of the 4th largest
global crude steel producer in 2012, India has also made a mark globally in the
production of sponge iron/direct reduced iron (DRI). Thanks to mushrooming
growth of coal-based sponge iron units, domestic production of sponge iron
increased rapidly, enabling the country to achieve and maintain the number one
position in the global market. With a series of mega projects and the domestic
economy carrying forward the reform process further, the future of Indian steel
industry is definitely optimistic. A new ‘Steel Vision’ for the next 20 years
is also under finalization.
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