INDUSTRY & SERVICES

STEEL
Steel is vital to the development of any modern economy and is considered
to be the backbone of the human civilisation. The level of per capita
consumption of steel is treated as one of the important indicators of socio-
economic development and living standard of the people in any country. It
is a product of a large and technologically complex industry having strong
forward and backward linkages in terms of material flow and income
generation. All major industrial economies are characterised by the
existence of a strong steel industry and the growth of many of these
economies has been largely shaped by the strength of their steel industries
in their initial stages of development.
Global Ranking of Indian Steel
Global crude steel production reached 1220 million tonne in 2009.China
was the largest crude steel producer in the world with production
reaching 567.8 million tonne, a growth of 13.5 per cent over 2008. India
once again emerged as the fifth largest producer in 2009 and recorded a
growth of 2.7 per cent as compared to 2008, the only other country in the
top 10 bracket to register a positive growth during 2009. India also
emerged as the largest sponge iron producing country in the world in
2009, a rank it has held on since 2002. If proposed expansions plans are
implemented as per schedule, India may become the second largest crude
steel producer in the world by 2015-16.
Steel Sector Trends
India emerged as the fourth largest steel producer in the world and
is expected to become the 2nd largest producer of crude steel in the
world by 2015.
India also maintained its lead position as the world's largest
producer of direct reduced iron (DRI) or sponge iron. Sponge iron
production for sale was 20.8 million tonnes in 2008-09 which was
higher by 2.1% over 2007-08.
The country is likely to achieve a crude steel production capacity of
124 million tonnes by the year 2012.
222 Memorandum of Understanding (MoUs) have been signed by
the investors with various State Governments for setting up
additional 276 million tonnes of steel capacity in the country.
Production,Consumption and Growth of Steel
Total Finished 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:
Total finished steel (alloy + non-alloy) ('000 tonne)
Year
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*
3849 45210 2099 40997
Source: Joint Plant Committee(JPC); * =Provisional
Crude Steel
The crude steel performance has been contributed largely by the
strong trends in growth of the electric route of steel making,
particularly the induction furnace route, which accounted for 31 per
cent of total crude steel production in the country during 2008-09
and has emerged as a key driver of crude steel production.
The growth was driven by capacity expansion from 47.99 million
tonne per annum (mtpa) in 2004-05 to 72.76 mtpa in 2009-10 (upto
December 2009).
Crude steel production grew at an annual growth rate of 8.6 per cent
during the five years, 2004-05 to 2008-09.
Production for sale of total finished steel at 57.16 million tonne
during 2008-09 as against 43.51 million tonne in 2004-05 at average
annual growth rate of 7%.
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:
Crude Steel
Year
Capacity
('000 tonne)
Production
('000 tonne)
Capacity
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
Crude Steel production by process route
The process route-wise production of crude steel in the country during
2004-05, 2008-09 and April-December 2009-10 (provisional) are shown
in the table below and indicates the emergence of the electric route of
production compared to the oxygen route:
Crude steel production
by Process Route
2004-05
Percentage
share (%)
2009-10*
(April-
December)
Basic Oxygen Furnace
(BOF)
52 45 47
Electric Arc Furnace (EAF) 18 24 26
Induction Furnace (IF) 30 31 27
Total 100 100 100
Source: JPC; * =Provisional
Sponge 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 to overall production;
its share has increased from 64% in 2004-05 to 74% in 2008-09. Capacity
in sponge iron making has also increased over the years and currently
stands at 32 million tonne.
The table below shows the production of sponge iron in the country in the
last five years and 2009-10 (April-December 2009) indicating the break-
up of the share of coal and gas based route of production:
Production of sponge iron
(unit: million tonne)
Year
2004-
05
2005-
06
2006-
07
2007-
08
2008-09
2009-10*
(April-
December)
Coal based 7.89 10.28 13.08 14.53 15.57 10.92
Gas based 4.64 4.54 5.26 5.84 5.52 4.56
Total 12.53 14.82 18.34 20.37 21.09 15.48
Source: JPC; * =Provisional
Pig Iron
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 accounts for nearly 90% of total production for
sale of pig iron in the country. The domestic availability situation of pig
iron is given in the table below:
Pig Iron Domestic Availability Scenario
('000 tonne)
Year
2004-
05
2005-
06
2006-
07
2007-08
2008-
09
2009-10*
(April-
December)
Production
for sale
3228 4695 4953 5284 6207 4248
Import 8 3 3 11 8 10
Export 393 440 707 560 350 227
Consumption 2791 4136 4336 4621 5870 4025
Source: JPC; * =Provisional
Trends in production,Private/Public sector
Traditionally, Indian steel industry has been classified into Main Producers
(SAIL plants, Tata Steel and Vizag Steel/RINL), Major Producers (plants
with crude steel making capacity above 0.5 million tonne-Essar Steel, JSW
Steel,Jindal Steel & Power and Ispat Industries) and 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.
The following table highlights the total as also the contribution of the
private and public sector in crude steel production in the country:
Indian Crude Steel production
(in million tonne)

2005-06 2006-07 2007-08 2008-09
2009-10*
(April-
December)
Public Sector 16.964 17.003 17.091 16.372 12.483
Private Sector 29.496 33.814 36.766 42.065 33.292
Total
Production
46.460 50.817 53.857 58.437 45.775
% share of
public sector
36.5 33.5 32 28 27
Source: JPC;* =Provisional
Major initiatives taken by the Ministry of Steel during the year 2009-10
Mega Expansion Plans of SAIL, RINL & NMDC Ltd.

The Steel PSUs are in the midst of ambitious expansion plans. The major
thrust of the modernization and expansion plans is to adopt the best
modern technology, which in addition to being cost effective should also
be energy efficient and environment friendly.The progress of the
expansion of Steel Authority of India (SAIL),Rashtriya Ispat Nigam Ltd
(RINL) and NMDC is monitored on a regular basis in the Ministry. As a
consequence of monitoring, a number of improvements have been put in
place in project implementation.

The expansion and modernization programme of SAIL is well underway
at all its steel plants to enhance the hot metal production capacity from the
level 13.82 million tonne per annum to 23.46 million tonne per annum
under its current phase. The current phase of expansion and
modernization is expected to be completed by the financial year 2012-13.
Out of the total investment on modernization and expansion, a provision
of US$ 2.29 billion has been made in the financial year 2009-10.
In respect of RINL, expansion plan for increasing liquid steel capacity
from 3.6 million tonnes to 6.3 million tonnes by 2010 is progressing as per
schedule. Stage-I of the project would be completed by October, 2010 and
Stage-II by September, 2011. Supply orders for all major packages have
already been placed. In case of RINL, the expansion plan would increase its
capacity from 3 million tonnes to 6.3 million tonnes of liquid steel
production per annum by 2010 and 2011 in phases, at an estimated cost of
around US$ 2.71 billion.

The progress of activities in respect of Integrated Steel Plant (ISP) of
NMDC is also well underway. The environmental clearance for Integrated
Steel Plant of NMDC at Nagarnar was accorded by the Ministry of
Environment and Forests (MoEF) on 15th September, 2009.
Chhattisgarh Government has sanctioned drawal of water for NMDC.
NMDC is in the final stage of the process of shortlisting of the technology
provider and the process is expected to be completed shortly.

Steel Processing Units

SAIL has planned to set up Steel Processing Units (SPUs) at various
locations in Bihar (Bettiah,Mahnar, Gaya); Uttar Pradesh (Lakhimpur);
Madhya Pradesh (Gwalior, Ujjain and Hosangabad);Himachal Pradesh
(Kangra) ; Assam (Guwahati) and Jammu & Kashmir (Srinagar) to meet
customers demand for supplying sized and finished steel near the point of
consumption, particularly in states where there are no steel plants and
where steel consumption is low compared to the national average. Out of
these units envisaged, foundation stones have been laid at nine sites
(Bettiah, Mahnar, Gwalior, Ujjain, Hosangabad, Gaya, Lakhimpur, Kangra
and Srinagar). The SPU at Bettiah is under implementation.

Merger/acquisitions/revival and restructuring of PSUs
Government has approved merger of Sponge Iron India Limited (SIIL)
with NMDC. The merger procedures and formalities at the corporate level
of NMDC and SIIL have been completed. The final formalities at the level of
the Ministry of Corporate Affairs are underway
BRL has finally been merged with SAIL w.e.f. 1.4.2007 (appointed date)
by an order of the
Ministry of Corporate Affairs (MCA) filed with Registrar of Companies
(ROC) on 27.08.2009.
BRL is now rechristened as SAIL Refractory Unit (SRU).
Draft Scheme of amalgamation with appointed date of merger as 1.4.2010
has been approved by the Ministry and has been filed on 7.12.2009 with
the Stock Exchanges where
SAIL and MEL are listed for their approval. Thereafter, the Scheme would
be filed with the Ministry of Corporate Affairs for issue of the Order of
Amalgamation. Efforts will be made to ensure that all the approvals are
obtained in the next three months and the merger process completed by
the end of June 2010. After the merger, a capital investment of Rs.250
crore is proposed to be made to enhance the capacity of the plant.
The Cabinet has approved a restructuring plan for Bird Group of
Companies (BGC).The restructuring proposal envisages converting under
BGC into Public Sector Undertakings and vesting their management
control to Rashtriya Ispat Nigam Limited (RINL), in a subsidiary cum
holding structure in order to make these companies economically viable
and sustainable.
Economic Stimulus Measures initiated by the Government of India
(i) Export Duty on steel items (except melting scrap) withdrawn with
effect from 31.10.2008;
(ii) Duty Entitled Pass Book (DEPB) on steel items restored with effect
from 14.11.2008;
(iii) Import Duty on iron and non-alloy steel items re-imposed at 5% with
effect from 18.11.2008;
(iv) Central Value Added Tax (CENVAT) on steel items reduced to 8% with
effect from 24.02.2009; and
(v) Countervailing duty (CVD) on Thermo Mechanically Treated (TMT)
bars and structurals were reintroduced with effect from 02.01.2009.
Public sector undertakings in steel Industry
Steel Authority of India Ltd., (SAIL), New Delhi
Kudremukh Iron Ore Company Ltd. (KIOCL), Bangalore
National Mineral Development Corporation Ltd. (NMDC), Hyderabad
Hindustan Steelworks Construction Ltd. (HSCL), Kolkata
MECON Ltd., Ranchi
Manganese Ore (India) Ltd. (MOIL), Nagpur
Sponge Iron India Ltd. (SIIL), Hyderabad
Bharat Refractories Ltd. (BRL), Bokaro
Rashtriya Ispat Nigam Ltd. (RINL), Visakhapatnam
MSTC Ltd., Kolkata
Ferro Scrap Nigam Ltd. (FSNL), Bhilai, (A subsidiary of MSTC Ltd.)
Other Public Sector Undertakings (PSUs)
1. Kudremukh Iron Ore Company Limited (KIOCL)
2. National Mineral Development Corporation Ltd. (NMDC)
3. Hindustan Steelworks Construction Limited (HSCL)
4. MECON Limited
5. Bharat Refractories Ltd. (BRL)
6. Manganese Ore (India) Ltd. (MOIL)
7. Sponge Iron India Ltd. (SIIL)
8. Rashtriya Ispat Nigam Ltd. (RINL)
9. MSTC Ltd.
10. Ferro Scrap Nigam Limited (FSNL)
Private Sector
Tata Steel Ltd.
Essar Steel Ltd.
JSW Steel Ltd.
Jindal Steel & Power Ltd.(JSPL)
Ispat Industries Ltd. (IIL)
Bhushan Power & Steel Ltd.
Monnet Ispat & Energy Ltd.
Foreign direct Investment in Steel Sector
The Foreign Direct Investment in steel (ferrous) for the past three
financial years and the current year (AprilDecember 2009-10) is given in
the table below: -
S. No.
Year (April-
March)
FDI (in Rs.) FDI (in US$)
1 2006-07 1281.51 27.84
2 2007-08 53.48 1.32
3 2008-09 3352.94 69.21
4
2009-10 (Apr-
3945.17 81.57
Dec)
(Source: Department of Industrial Policy & Promotion)
Policy Framework
National Steel Policy - 2005
Objective: Strategic Goal
The long-term goal of the national steel policy is that India should have a
modern and efficient steel industry of world standards, catering to
diversified steel demand. The focus of the policy would therefore be to
achieve global competitiveness not only in terms of cost, quality and
product-mix but also in terms of global benchmarks of efficiency and
productivity. This will require indigenous production of over 100 million
tonnes (mT) per annum by 2019-20 from the 2004-05 level of 38 mT. This
implies a compounded annual growth of 7.3 percent per annum.
Strategy
A multi-pronged strategy would be adopted to move towards the long-
term policy goal. On the demand side, the strategy would be to create
incremental demand through promotional efforts, creation of awareness
and strengthening the delivery chain, particularly in rural areas. On the
supply side, the strategy would be to facilitate creation of additional
capacity, remove procedural and policy bottlenecks in the availability of
inputs such as iron ore and coal, make higher investments in R&D and
HRD and encourage the creation of infrastructure such as roads, railways,
and ports.