Ministry of Steel

Ministry of Steel Strategic Plan for next five years (2011-16) Indian Steel Industry - Background Iron and steel has for ages provided the key input for building a nation’s physical infrastructure and industrial base. If we trace the origin and growth of Indian steel industry itself, it has been one of the primary movers for the country’s shift from a basically agrarian to an industrialised economy. The sector’s growth has not only been parallel to our political transition from a foreign colony to an independent sovereign state but also to the transition from a regulated/planned regime to an open and globalised one. At the time of independence, India was producing around one million tonnes of steel per annum with matching consumption levels. The economic strategy of rapid industrialisation with self-sufficiency (import substitution) also meant that a special thrust was given to promotion of steel industry and for two obvious reasons - firstly, to give a fillip to domestic industrialisation and secondly to exploit the nation’s large reserves of iron ore and coal – the two critical raw materials required for steel making. The regime of planning and control continued for more than four decades i.e. till early 90’s leading to reservation of large scale integrated capacities in the public sector, introduction of price and distribution controls, protectionist trade barriers as well as restrictions on import of foreign technology and equity participation. Initially these initiatives did encourage the sector’s growth but mainly on account of the new capacities created. By the mid 70’s however the growth had became sluggish and the government found it increasingly difficult to mobilise enough resources to invest in either creation of new capacities or expanding of the existing ones. As a result, the only capacity additions that could take place were in the scrap-based small and medium scale Electric Arc Furnace (EAF)/ Induction Furnace (IF) units operating in the secondary sector. There was also a decline in over all steel consumption levels with slowing down of industrial growth, capital formation and investment flows. 1 The above scenario changed with adoption of the general economic policy of liberalisation and reforms in 1991 following which the steel industry was also deregulated in 1992 marking a watershed in the industry’s development. With opening up of the sector the erstwhile regime of controls were wholly dismantled i.e. capacity controls and reservation for the PSUs were withdrawn, prices and distribution (with the exception of a few areas such as SSIs) were freed, trade barriers rationalised with reduction in tariff rates, de-licensing/de-canalisation (introduction of OGL) of imports and removal of export ceilings, the policy of freight equalisation replaced by freight ceilings as a first step towards total replacement and the sector opened up for foreign direct investment (FDI) and technology imports. The far-reaching policy changes resulted in decadal additions to capacity as well as consumption of steel within first five years after the deregulation and it also saw the rise of private sector in the industry. With the changed viability conditions there was also a movement towards adoption of state-of-the-art technologies in both the new and old capacities, improvement in operative efficiency levels and improved quality parameters of the products including product-mix (Trends in steel production, consumption and capacity utilisation since 2001-02 are given at Annexure I, II and III). After deregulation, the rapid pace of growth and the existing market trends called for certain guidelines and frame work. This led to the formulation of a National Steel Policy (NSP) which was announced in November, 2005. As a basic blue print for the growth of a self reliant and globally competitive Indian steel sector, it proposed facilitating the removal of procedural and policy bottlenecks that affect the availability of production inputs, increased investment in research and development, and creation of supportive road, railways and port infrastructure for the industry. The policy though focused on the domestic sector also envisaged a steel industry growing faster than domestic consumption which will enable export opportunities to be realised. Today India has emerged as the fifth largest producer of steel and also the single largest sponge iron producing country in the world (The global crude steel production during 2009 had touched 1220 million tonnes. Of this the largest share was contributed by China (567.8 millon tonnes) followed by Japan (87.5 millon tonnes), Russia (59.9 millon 2 tonnes), US (58.1 millon tonnes) and India (56.6 millon tonnes) respectively. Steel manufacturing is a core sector with strong forward and backward linkages with many other sectors of the economy. It contributes to nearly 2% of our Gross Domestic Product (GDP) and provides employment to over five lakh people. The sector has been able to withstand the sluggish growth on account of the global downturn and adverse market conditions and this was mainly on account of the resurgence in automotive appliances, capital goods and construction sectors. As a result, both domestic and foreign investors have continued to show a great deal of interest in setting up of fresh steel capacities in the country. As of today, a total of 222 MOUs have been signed for setting up of 275.7 million tonnes of steel investments in the country including three FDI projects (12 mtpa POSCO Projects in Orissa, 12 mtpa ArcelorMittal projects in Orissa and Jharkhand). The sector also remains one of the major contributors to the national exchequer and in 2009-10 the net profit earned by all profit making PSUs taken together itself was to the tune of over Rs. 10,000 crore. The Ministry’s vision for such a vibrant sector as already outlined in the National Steel Policy (NSP), is that of building an industry of global standards with capacity to cater to different as well as diversified demand for all types of steel and steel based items/ products. Therefore, the proposed strategic plan for the next five years i.e. 2011-16 will also focus on implementation of initiatives for achieving global competitiveness not only in terms of cost, quality and product-mix but also of matching the global benchmarks of efficiency and productivity. The details of such a strategic plan as outlined below has also been formulated after taking into consideration the various interests and aspirations of all the stakeholders involved. 3 1. Vision, Objectives and Functions Vision The ministry’s vision for the industry is to transform India into a global leader in the steel sector, both as a steel producer as well as a steel consuming nation and to enhance the industry’s international competitiveness. Mission 1) Promoting policies, initiatives and incentives for attaining a national steel production capacity exceeding 100 million tonnes per annum by the year 2015-16. 2) Streamlining the regulatory environment for enabling optimal steel production; particularly regarding mineral policy and the mine allocation regime, tariff and taxation measures, land allocation and environmental and forest clearances. 3) Promoting the development of infrastructure required for enhancing national steel production through coordinated efforts, particularly in sectors like Railways, Roads, Ports, Power and Water supply. 4) Enhancing domestic demand for steel through promotional efforts and by enlarging the retail network of steel companies. 5) Improving the techno-economic efficiency of operations of steel ministry’s PSUs. Objectives 1) 1(a) To facilitate the early realisation of steel investment proposals both in the public and private sector through coordination and consensus building with state governments and agencies of the union government particularly through the forum of the Inter Ministerial Group (I.M.G.); for attaining the national objective of total finished steel production exceeding 100 million tonnes by 2015-16. 4 1(b) To facilitate creation of appurtenant infrastructure required for steel capacity addition and to pursue clearance required by the public and private sectors in areas like mineral allocation, land allocation and environmental & forest clearances. 2) To oversee the completion of the capex and modernisation programmes of the PSUs particularly SAIL, RINL and NMDC. 3) Ensuring adequate availability of raw materials for steel industry from domestic and overseas sources, particularly iron ore and coal by PSUs under the steel ministry. 4) To facilitate and monitor mergers, acquisitions and Joint Ventures by the steel ministry PSUs. 5) To pursue with the Ministry of Finance and the Ministry of Commerce for the adoption of fiscal and tariff measures for ensuring the sustainability and future prospects of the Indian steel industry. 6) Promotion of Steel usage through cost effective steel products, dissemination of knowledge and ensuring higher steel availability in rural areas 7) Promotion of Research and Development in steel sector. 8) To improve the commercial and technical efficiency of operations of all PSUs. 9) To encourage implementation of Quality control standards in manufacture of steel and steel based products. Functions 1) Matters relating to production, distribution, imports and exports of iron and steel and ferro alloys. 2) Matters relating to the PSUs including their subsidiaries under the ministry’s administrative control i.e. (i) Steel Authority of India Ltd (SAIL); (ii) NMDC Limited ; (iii) Rashtriya Ispat Nigam Ltd (RINL); (iv) Manganese (Ore) India Ltd (MOIL); (v) MSTC Ltd; (vi) Ferro Scrap Nigam Ltd (FSNL); (vii) Hindustan Steelworks Construction 5 Ltd (HSCL); (viii) MECON Ltd; (ix) KIOCL Ltd; and (x) Bird Group Ltd and also the company/undertaking set up for foreign acquisition of coal assets i.e. the International Coal Ventures Limited (ICVL) 3) Planning, development and facilitation for setting up of iron and steel production facilities including Electric Arc Furnace (EAF) units, Induction Furnace (IF) units, processing facilities like re-rollers, flat products (hot/cold rolling units), coating units, wire drawing units and steel scrap processing including ship breaking.

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