Editorial April 2019

 

Dear Readers,

A few years back, Ministry of Steel (Govt of India) set a target of creating 300 mtpasteel making capacity by 2030-31 and this attracted various types of reactions from different sections within iron & steel industry of the country. Present steelmaking capacity of the country is around 135 mtpa. Thus to achieve 300 mtpa capacity, the country has to create around 165 mtpa capacity in around 12 years, i.e. around 13 mtpa of capacity addition every year.

Few analysts felt that this figure of 300 mtpa is quite ambitious and cannot be achieved while others felt that maybe this is a bit hard to achieve the target but it will help the industry to think in a positive direction and will surely provide a much required forward push. This also manifests the government’s position and its willingness to help the industry to grow. I definitely see a point in this.

We all know that to produce a tone of finished steel, three tons of raw materials have to be moved. Thus to move 900 tonnes of raw materials and 300 tonnes of finished steel, we need really huge infrastructure and transport facilities. Further, along with the finished steel capacity, the raw materials (such as iron ore, coal & coke, ferroalloys, lime etc.) availability has to be geared up. Another issue related to this acquisition bill. Greenfield steel plants require big land mass and unless this bill is passed, required land availability may not be possible. Brownfield expansions have their own limitations of land and thus can contribute only marginally to capacity creation. The last and most important point is building and running these steel plants. While there are not enough companies to design, erect and commission a steel project, there is also a huge gap in terms of technical manpower required to run the plant. Metallurgists are in a smaller number when compared to all the engineering branches. Even today, it is extremely difficult to find an experienced metallurgist to run a steel unit. To summarize, there are challenges to overcome in order to achieve the target of 300 mtpa, but again, not impossible. Nobody can deny that the overall performance of the national economy will have a very big impact on the prospects of the iron & steel sector.

My point is slightly different. ‘Steel’ being an intermediate product, should not have any ‘target’ of its own. It should only have a capacity ‘projection’ depending on the estimated demand from the user sector. While doing the projections calculations also, many ‘experts’ merely add the future capacity expansion plans of individual companies and arrive at the final capacity figure. The correct methodology should be to study various user sectors, estimate their growth rates, estimate their future demand of steel, consider an export-import factor in the light of the global economy and then finally arrive at the future estimated demand projection. In my opinion, such an exhaustive exercise only can give us a fairly realistic picture of the future growth of iron & steel industry in the country.

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