A Critical Analysis Of Iron And Steel Sector Of India share yyIron And Steel Sector Of India - To boost demand and take the country to a $5 trillion economy goal, the ‘government has now set the focus an increasing steel production to 160 million tonnes, Dissecting The Matter Current status of Steel sector of India: + India is the world’s second-largest producer of steel. Its crude steel capacity has risen to ~142 MT at present. + The M istry of Steel, Govt. of Indi responsible for planning and development of iron and steel industry, development of essential inputs such as iron ore, mestone, dolomite, manganese ore, chromites, Fetro-alloys, sponge iron, etc. and other related functions, ‘+The sustained rise since 2014-15: Crude steel production grew at a compound annual growth rate (CAGR) of 5.6% during the last five years ending 2018-19, + The country is the 3rd largest consumer of finished steel in the world in 2018, + Net export/import scenario: India was a net exporter in 2016-17 and 2017-18, however, it returned to being a net importer in 2018-19. India has been a net exporter of finished steel in FY20, Key factors for India’s strong growth rate in crude steel capacity ‘+ The per capita consumption of finished steel in India has increased from 60.8 kg in 2014-15 to 74.1 kg in 2018-19 + Vibrant Sponge iron industries (especially for electrical routes of steelmaking) and pig iron industries serve as crucial inputs for the steel industry. + The coal-based route has emerged as a key contributor and accounted for 80% of total sponge iron production in the country in 2018-19, + Favorable loc ns for iron & steel industries in In In India, the iron and steel industry has grown due to the availability of raw materials, cheap labor, transport, and market. Prominent centers such as Bhilai, Durgapur, Burnpur, Jamshedpur, Rourkela, Bokaro are situated in a Chhotanagpur Plateau region iwinich has an abundant supply of raw materials like iron ore, coal (coking coal), limestone, etc of onWhat is the difference between iron and steel? + Those irons containing less than 2?rbon are known as steels while those containing more than 2?rbon are known as pig iron. * Pig iron is obtained from iron ore by processing it with coke in a blast furnace. ‘* This pig iron is then further processed to reduce the carbon content in different furnaces to obtain steels. ‘These steels can be then further processed to obtain alloy steels, stainless steels by adding elements such as silicon, manganese, chromium, nickel, etc. Sponge iron Vs. Pig iron + Sponge iron is a form of iran that is directly produced by reduction of iron ore (with the help of reducing agents). Therefore, itis also known as direct reduced iron (ORI). + On the other hand, pig iron is a form of iron that is produced along with charcoal and limestone under high pressure. #n which has a higher content of carbon in it. ‘The production process of sponge iron is a liquid state process whereas; it is a solid-state process for pig iron, * Density: Sponge iron is porous while the pig iron is denser. => ay = sr 5 Significance of the steel sector:+ The Government's vision to achieve a $5 trillion economy by 2024 entails investments worth INR 100 lakh crore in infrastructure sectors, including several steel-intensive sectors like Housing for All, 100% electrification, piped water forall, ete + Steel has several inherent advantages of durability, faster completion time, reduced environmental impact, and creation of a circular economy. + Steel has also been proven to be a driver for prompt environmentally sustainable economic development due to its recyclable nature and faster-associated completion times * The steel! sector is also pivotal for a nation due to driving employment generation and economic growth. Steel is used in a number of key industries like automobile, process plants, capital goods, and defense equipment. + Ithas a multiplicative effect on the economy stemming from both direct and associated effects on the supply chain and consumption industries. Key Concerns: + Shortage of raw material: Iron ore and coking coal are two key raw materials used in steel manufacturing, while coal is also used in a big way by captive power plants to generate power. Closure of mining at the country’s largest iron ore miner NMDC’s Donimalai mine in Karnataka will affect the availabilty of iron, especially for south Indian mills + Captive mines: The age-old policy of steel production based on captive iron ore or coal has benefited only, the old entities like Steel Authority of India Ltd, (SAIL) and Tata Steel (erstwhile Tata iron and Stee! Company). The new generation steel producers have not been freely provided with captive iron ore mines. * Flawed mining policy: The government does not really have a clear policy on mining with a view to providing steelmakers and miners with the advantage of an abundance of local resources. + Dependence on imported coking coal and import of high-grade steel: About 85 percent of the current requirement of coking coal is met through imports and increasing the domestic coking coal use to 65 percent by 2030-31, as per the National Steel Policy, could be a “challenge. © India was a net importer of steel during the 2018-19 fiscal year, the first time in three years, as the country lost market share among its traditional steel! buyers and imports jumped on demand for higher-quality steel domestically + Transportation issue: The coal-based steel, power, and aluminum plants continue to face supply-related issues due to the unavailability of adequate railway rakes. + Tax burden: The royalty, local area development tax, forest development tax, and many such taxes have put a significant financial burden on the mining industry. The costs get passed on to the steel industry. © Mining is an environmentally challenging activity, the socio-economic or environmental costs on account of mining should directly be borne by the miners. + Low FDI inflow: In the absence of domestic expertise at the highest global level and large capital to fund big steel projects, the government liberalized the foreign investment regime and accorded all supports to such proposals, However, several cases of foreign investment in India turned out to be unsuccessful * Large scale dumping of Chinese steel in India & trade war: slowdown in Chinese exports to the U.S due to trade wars made China dump steel at predatory prices in India which could potentially disrupt the demand-supply dynamics in Indian domestic markets, especially for products such as electronic goods, iron, steel, chemicals, and polymer products. + Structural issues: The steel industry in India faces certain deep structural flaws. The industry is built around {a widely diverse technology mix with co-existence of both very small, medium and large integrated works with a high degree of vertical disintegration. + Relatively weak Production efficiency: The raw materials and energy consumption have been much higher than the global average, as shown in the New Steel Policy 2017. Interestingly on most major parameters, the targets set for 2030- 31 are worse than the current global best benchmarks. Manpower productivity has been equally low. an+ Poor per capi with the global average of 214 kg. + Protectionist measures by countries: India's exports during the fiscal year declined after rival steelmakers in China, Japan, South Korea, and Indonesia, blocked from markets in the United States and Europe by tariffs and other protectionist measures, ate away at the country's markets in the Middle East and Africa, + Highly capital & technology-intensive industry: Currently, there is a lack of adequate capital in our investment-starved economy. + The steel sector is recognized as stressed by the banks. According to a Crisil report, steel companies with 22 MT capacity were referred to the National Company Law Tribunal (NCLT) in the RBI's first round of resolution of stressed assets. The MSMES in Steel Sectors are finding it difficult to get the Credit from Banks and thus impacting their production + Insolvency-driven buyout attempts by global giants as well as by existing promoters have intensified competition, eg. the Essar steel buyout by Arcellor Mittal + The majority of Steel production is from Public Sector Enterprises. It hampers the competitive edge to the Private Sectors. As of now, CPSEs have primarily focused and invested more in the brown-field expansion of similar steel capacity with limited value addition in terms of high-end product development. ime-consuming land and environmental approvals: The complex approval taking process makes it difficult for the industry to grow. * Economic slowdown: India's Economy is suffering from the slow growth in major consuming sectors consumption - Currently, India's per-capita consumption stands at only 69 kg, compared such as automotive and consumer durables. © The growth in the Indian economy slowed down due to weak rural demand, high eil prices and rupee depreciation against the dolar. t has spillover effects on the Steel Sector. © Weak demand for steel: India's stee! production growth rate slowed down to a 5-month low of 1.6 percent in September this year due to the slump in key sectors like automobiles, consumer durables and a decline in spending on infrastructure. + MSME’s concern: I the import duty on steel is hiked, MSMEs have to either cut output due to non- availabilty of steel or shut down shops leading to an increase in unemployment in the country, Response To The Matter Government's Initiatives: + The National Steel Policy 2017 has laid down the broad roadmap for encouraging long term growth for the Indian steel industry, both on-demand and supply sides, by 2030-31 + Key features of the NSP 2017 include establishing self-sufficiency in steel production by providing policy support & guidance to private manufacturers, MSME steel producers, and CPSEs. + It encourages capacity additions, development of globally competitive steel manufacturing capabilities as well as cost-efficient production by facilitating domestic availability of iron ore, coking coal & natural 925, as well as overseas asset acquisitions of raw materials. + To support the sector, it also promotes initiatives to enhance the domestic steel demand + The policy projects crude steel capacity of 300 million tonnes (MT), production of 255 MT and a robust finished steel per capita consumption of 160 Kg by 2030-31, as agains consumption of 74 Kg + The policy also envisages 100% indigenous fulfillment of the demand for high-grade automotive steel, electrical steel, special steels and alloys for strategic applications along with an increase in domestic availability of washed coking coal so as to reduce import dependence on coking coal from about 85% to around 65% by 2030-31 + To action the initiatives mentioned as part of the National Steel Policy, a strategic roadmap is being created by the Ministry of Steel. he current 7Steel Scrap Recycling Policy: It aims to promote 6Rs principles of Reduce, Reuse, Recycle, Recover, Redesign land Remanufacture through scientific handling, processing and disposal of all types of recyclable scraps including non-ferrous scraps, through authorized centers/facility. + To promote the circular economy in the steel sector. + To promote a formal and scientific collection, dismantling and processing activities for end of life products that are sources of recyclable (ferrous, non- ferrous and other non-metallic) scraps which will lead to resource conservation and energy savings and setting up of an environmentally sound management system for handling ferrous scrap. + To produce high-quality ferrous scrap for quality steel production thus minimizing the dependency on imports ‘+ To decongest the Indian cities from ELVs and reuse of ferrous scrap. + To create a mechanism for treating waste streams and residues produced from dismantling and shredding facilities in compliance with Hazardous & Other Wastes (Management & Transboundary Movement) Rules, 2016 issued by MoEF & CC. + E-Platform — MSTC Metal Mundi launched to facilitate the transparent sale of finished & semi-finished steel products, + Removing the steel sector from the list of industries reserved for the public sector and opened for the private sector also + Exempting it from compulsory licensing. * Allowing 100 percent Foreign Direct Investment (FDI) in the steel sector under the automatic route. * Basic excise duty for steel is set at 14% and there is no export duty on steel items. + There is 12.5 percent customs duty and a surcharge of 10 percent on most flat steel products, imports from China, Europe, and Commonwealth states. + Export duty of 30 percent has been levied on iron ore® (lumps and fines) to ensure supply to the domestic steel industry. + The government of India’s focus on infrastructure and restarting road projects is aiding the boost in demand for steel + The Government of India ised import duty on most steel items twice, each time by 2.5 percent and imposed measures including anti-dumping and safeguard duties on iron and steel items. * Five proposals for amendments in the relevant mining rules have been sent to the Ministry of Mines which includes Reduction in royalty proposed from 15% to 5% to dispose of low-grade fines to incentivize pelletization and beneficiation + Di jon of mines in steel CPSEs - To improve the operational and cost efficiencies as well as to increase the transparency in the mining sector, digitization is being driven across the Steel CPSES. * Collaborative branding campaign of ‘Ispati Irada’ launched with logo, portal, and communication by national-level brand ambassador P.V. Sindhu. Rectifying The Matter Way forward: + Modernization and expansion of the existing units as well as green-field plants to build a world-class, cost-competitive, environment-friendly and socially responsible industry. * Addressing the high cost of capital for the * Addressing industry concerns on the functioning of ports and rails. * Increasing raw material production by leveraging the digitization of mi * Reducing coking coal al sector, ing. port: The best way to maximize utilization of Indian coking coal would be to conventionally wash it at 18 percent ash and treat the rest of coal in new technologies to reduce the ash below 8-10 percent so that the overall ash content gets reduced in the blend, er+ Transportation of raw mat should be promoted. + Port-led development of steel clusters should be carried out under the aegis of the Sagarmala program. + Simplifying the approval process for environmental clearances & coastal regulation zone (CRZ) clearances, improved connectivity with the road through dedicated corridors and rail, etc. + Finding new markets for India-made steel and a shift in the industry's attention towards the production of special steel. The inability to develop new products will mean increased competition from imports. + The PSUs need to ramp up their overall production. In order to provide economies of scale, CPSES will be Is and finished goods through inland waterways and coastal shipping encouraged to increase focus on their core competencies and divest their non-core assets through mergers and restructuring © CPSEs should be encouraged to develop a policy for future investment so that impetus could be given for the development of value-added steel capacity and adoption of the latest technologies at par with global best practices + Measures such as anti-dumping duties, safeguard duties and other countervailing measures should be judiciously used to protect the domestic industry from the cheap iron and steel products. + Improving productivi survive only when their labor costs are reduced and manpower productivity is maximized * Devising vehicle scrappage policy: the road ministry is looking at giving rebates on road tax upon showing the certificate of scrapping by a vehicle owner, ‘The steel industry, ike most other capital intensive industries, will be able to The government's policy must be invest ment-friendly. Bringing the Indian steel product under the quality control order will helo the government to keep away the inferior quality of steel, Fast-tracking various «learances and resolution of issues related to investments will bring forward the ‘Ispati rada’ in true spirit Economic Growth And Development m