The Hindu : Business : Steel industry asked to aim at 60 m tonne capacity by 2012

Online edition of India's National Newspaper
Tuesday, Jun 08, 2004

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Business

Steel industry asked to aim at 60 m tonne capacity by 2012

By Our Staff Correspondent

MUMBAI, JUNE 7. The Indian Steel Alliance (ISA), an association of five major flat steel producers in India, has unveiled an advertising campaign, which is intended to strengthen the Indian steel industry and highlight the importance of steel in daily life. The campaign's theme is `Magic of Steel' and it is scheduled to come to market in the next few weeks.

While addressing the media here, Jamshed J. Irani, Chairman, ISA, said, "While India is one of the most cost competitive producers of steel in the world, the per capita consumption of steel at 29 kg compared to the world average of 140 kg, is one of the lowest in the world. There is a large scope to increase the consumption levels.''

Speaking on the occasion, Moosa Raza, President, ISA, said that since December 2002, the prices of inputs had gone up manifold. Example: Coke has increased 317 per cent, melting scrap by 173 per cent, Pig iron by 218 per cent, iron ore by 292 per cent and freight charges by 344 per cent. "Over the same period, domestic prices had actually dipped and are only now recovering,'' said Mr. Raza.

Regarding the belief that domestic producers have been exporting steel because of better realisations overseas, Mr. Raza said, "domestic demand has always been a priority for the major players. Over the last two years, exports by the ISA members grew only 2 per cent.''

According to the ISA, issues confronting the steel industry are shortage of quality raw materials, inadequate `enabling' infrastructure, high cost of basic inputs such as power, high cost of capital and high tariff/non-tariff barriers imposed on Indian exports by developed nations. Vinod Mittal, Chief Executive Officer, Ispat, said, "What is also needed is a stable government policy for the industry.''

The Government has said that the industry should aim at achieving a capacity of 60 million tonnes by 2011-12 from the current 35 million tonnes. "That means an addition of 25 million tonnes which will cost of Rs. 75,000 crores,'' said Dr. Irani.

Regarding the China factor and its effect on the steel industry, Mr. Raza said in the last year alone, China added 20 million tonnes of capacity, "and has been doing so successfully for the last five to seven years. However, next year onwards, the growth will go from 9.1 per cent to 8.2 per cent and thereafter flatten out at 7 per cent. That would ease pressures on supplies.''

In February this year, there was an outcry by users that steel producers were hiking prices. On government intervention, the producers had agreed to roll back or hold back price increases of hot rolled coils at Rs. 25,000 a tonne up to June 2004. "It is June now and the producers can choose what they want to do with their prices,'' said Dr. Irani.

The ISA has recommended developing raw material resources to ensure supply, improved infrastructure, access to cheaper funds, allowing market forces to determine steel prices, resumption of DEPB benefits suspended since March, maintaining import duty and excise duty at 15 and 8 per cent respectively and discouraging the imports of defectives which affects the quality of the domestic industry.

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