Overview of iron and steel industry - Free Essay Example

OVERVIEW OF IRON AND STEEL INDUSTRY Introduction Steel is crucial to the development of any modern economy and is considered to be the backbone of human civilisation. The level of per capita consumption of steel is treated as an important index of the level of socioeconomic development and living standards 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 flows 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. Steel industry was in the vanguard in the liberalisation of the industrial sector and has made rapid strides since then. The new greenfield plants represent the latest in technology. Output has increased, the industry has moved up in the value chain and exports have risen consequent to a greater integration with the global economy. The new plants have also brought about a greater regional dispersion easing the domestic supply position notably in the western region. At the same time, the domestic steel industry faces new challenges. Some of these relate to the trade barriers in developed markets and certain structural problems of the domestic industry notably due to the high cost of commissioning of new projects. The domestic demand too has not imp roved to significant levels. The litmus test of the steel industry will be to surmount these difficulties and remain globally competitive. Historical Perspective The finished steel production in India has grown from a mere 1.1 million tonnes in 1951 to 31.63 million tonnes in 2001-2002. During the first two decades of planned economic development, i.e. 1950-60 and 1960-70, the average annual growth rate of steel production exceeded 8%. However, this growth rate could not be maintained in the following decades. During 1970- 80, the growth rate in steel production came down to 5.7% per annum and picked up marginally to 6.4% per annum during 1980-90, which further increased to 6.65% per annum during 1990-2000. Though India started steel production in 1911, steel exports from India began only in 1964. Exports in the first five years were mainly due to recession in the domestic iron and steel market. Once domestic demand revived, exports declined. India once again started exporting steel only in 1975 touching a figure of 1 million tonnes of pig iron and 1.4 million tonnes of steel in 1976-77. Thereafter, exports again declined to pick up only in 1 991-92, when the main producers exported 3.87 lakh tonnes, which rose to 2.79 million tonnes in 1995-96 and 3.3 million tonnes in 2001-02. The growth in the steel sector in the early decades after Independence was mainly in the public sector units set up during this period. The situation has changed dramatically in the decade 1990-2000 with most of the growth originating in the private sector. The share of public sector and private sector in the production of steel during 1990-91 was 46% and 54% respectively, while during 2001-02 the same was 32% and 68% respectively. This change was brought about by deregulation and decontrol of the Indian iron steel sector in 1991. A number of policy measures have been taken since 1991 for the growth and development of the Indian iron steel sector. Some of the important steps are (a) removal of iron steel industry from the list of industries reserved for the public sector and also exempting it from the provisions of compulsory licensing under t he Industries (Development Regulation) Act, 1951, (b) deregulation of price and distribution of iron steel, (c) inclusion of iron and steel industry in the list of high priority industries for automatic approval for foreign equity investments upto 51%. This limit has been since increased upto 100%, (d) lowering of import duty on capital goods and raw materials etc. Growth of the Indian Steel Sector after Liberlisation Finished Carbon Steel The Indian steel sector was the first core sector to be completely removed from the licensing regime as well as pricing and distribution controls. This was done primarily because of the inherent strengths and capabilities demonstrated by the Indian iron and steel industry. The growth rate in 1995-96 was a phenomenal 20%. During 1996-97, finished steel production shot up to a record 22.72 million tonnes with a growth rate of 6.2%, while in 1997-98, the finished steel production increased to 23.37 million tonnes, which was 2.8% more than the production of the preceding year. The growth rate decreased drastically in 1997-98 and 1998-99 being 2.8% and 1.9% respectively. The growth rate in 2001-2002 was 4.29% with the total production touching 31.63 million tonnes. The production of finished steel during April December, 2002 has been 23.83 million tonnes, which is 6.3% higher than the production during the corresponding period of 2001-02. Details of total production of finished carbon ste el and the share of main