Steel Industry in India

                                          INDIAN STEEL INDUSTRY – AN OVERVIEW

Introduction

Steel consumption is considered to be an important indicator of economic development and hence India’s economic growth is dependent upon the growth of the steel industry. Steel industry drives its demand from other important sectors like the automobiles, infrastructure, aviation, and construction etc. Hence there is high dependence on steel with the growth in these sectors which makes the growth of the steel industry dependent on the growth of these important sectors.

Background

India had a small Iron and steel industry at the time of independence with a capacity of one million tonne. Until the economic liberalisation the steel industry was under the control regime where large plant capacities were reserved for the PSU. For additional capacities producers needed to take licenses from the government. Foreign investment, imports and exports were also restricted.

With liberalisation these regulations were removed and since then the steel industry has been market oriented. This helped the private players to expand its operations and hence made their contribution to the total output increase over time.

With the development of the steel industry and the participation of the private players actively along with the integration of the industry of steel in India with that of the global steel industry, the government has come up with the National Steel Policy 2005 as a roadmap for the development of the steel industry. The policy envisions the production to reach 110 million tonnes by 2020 with the growth rate of 7.3% annually.

With the developments in India and the world as such from the demean and the supply side of the steel industry there was a need to relook into the elements of NSP 2005 and NSP 2017 was initiated as an effort to drive the industry to its full potential. The New Steel Policy 2017 envisages to achieve 300MT of steel-making capacity by 2030.

India is the 3rd largest producer of crude steel as per 2016 reports and is soon expected to become the second largest. India is also the 3rd largest finished steel consumer in the world as on 2016(data as per world steel association). This growth was initiated with the control regime being replaced by liberalisation and deregulation in the year 1991. After deregulation there has been no shortage of iron and steel materials as the production has expanded. Owing to the industrial development, India from a small capacity of 22 million tonne (in 1991-92 financial year) has grown to become the 3rd largest producer with the production of 92 MT and a capacity of 122 MT.

Competitive advantage

India has a competitive advantage in the production of steel due to the availability of high grade iron-ore and non-cooking coal. These two are said to be the two critical inputs in steel making. Additionally, India has a vast and growing market for steel with abundant workforce at low cost.

GDP contribution            2%

CAGR                            6.9% (2008-12)

Employment                20 lakh

Production

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India’s steel sector showed 11% growth in production in 2016-17 at 101.2 MT even as domestic consumption remained weak mainly due to poor demand from the end-use segments like construction, automobiles and white goods sectors.