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MINISTRY OF STEEL
Government of India
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Last Updated on : 22.03.2017

AN OVERVIEW OF STEEL SECTOR

Global Scenario | Domestic Scenario | Production | Demand - Availability Projection | Steel Prices | Imports | Exports | Levies on Iron & Steel | Opportunities for growth of Iron and Steel in Private Sector

Global Scenario

 

Note: Data for the year 2016 is provisional (source: World Steel Association) and per capita consumption data for 2016 is yet to be released

 

Domestic Scenario

  • The Indian steel industry has entered into a new development stage from 2007-08, riding high on the resurgent economy and rising demand for steel.
  • Rapid rise in production has resulted in India becoming the 3 rd largest producer of crude steel in 2015 and the country was the largest producer of sponge iron or DRI in the world during the period 2003 to 2015 and was the 2 nd largest producer in 2016 (after Iran).
  • As per the report of the Working Group on Steel for the 12 th Five Year Plan, there exist many factors which carry the potential of raising the per capita steel consumption in the country. These include among others, an estimated infrastructure investment of nearly a trillion dollars, a projected growth of manufacturing from current 8% to 11-12%, increase in urban population to 600 million by 2030 from the current level of 400 million, emergence of the rural market for steel currently consuming around 11 kg per annum buoyed by projects like Bharat Nirman, Pradhan Mantri Gram Sadak Yojana, Rajiv Gandhi Awaas Yojana among others.
  • At the time of its release, the National Steel Policy (NSP) 2005 had envisaged steel production to reach 110 million tonnes (mt) by 2019-20.
  • The National Steel Policy 2017 has been formulated keeping in mind the rapid developments in the domestic steel industry (both on the supply and demand sides) as well as the stable growth of the Indian economy since the release of the NSP 2005. The National Steel Policy 2017 is still in the draft stage.

Production

  • Steel industry was de-licensed and de-controlled in 1991 & 1992 respectively.
  • India is currently the 3 rd largest producer of crude steel in the world.
  • In 2015-16, production for sale of total finished steel (alloy + non alloy) was 90.98 mt, a decline of 1.3% over 2014-15.
  • Production for sale of Pig Iron in 2015-16 was 9.23 mt, a decline of 4.8% over 2014-15.
  • India was the largest producer of sponge iron in the world during the period 2003-2015 and was the 2 nd largest producer in 2016 (after Iran) . The coal based route accounted for 89% of total sponge iron production in the country in 2015-16.
  • Data on production for sale of pig iron, sponge iron and total finished steel (alloy/stainless + non-alloy) are given below for last five years and April-Jan. 2016-17:
  • Indian steel industry : Production for Sale (in million tonnes)

    Category

    2011-12

    2012-13

    2013-14

    2014-15

    2015-16

    April-Jan. 2016-17*

    Pig Iron

    5.37

    6.87

    7.95

    9.69

    9.23

    7.85

    Sponge Iron

    19.63

    14.33

    18.20

    20.38

    14.53

    12.39

    Total Finished Steel (alloy/stainless + non alloy)

    75.70

    81.68

    87.67

    92.16

    90.98

    83.01

    Source: Joint Plant Committee; *prov.

Demand - Availability Projection

  • Industry dynamics including demand – availability of iron and steel in the country are largely determined by market forces and gaps in demand-availability are met mostly through imports.
  • Interface with consumers exists by way of a Steel Consumers’ Council, which is conducted on regular basis.
  • Interface helps in redressing availability problems, complaints related to quality.

Steel Prices

  • Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are determined by the interplay of market forces.
  • Domestic steel prices are influenced by trends in raw material prices, demand – supply conditions in the market, international price trends among others.
  • An Inter-Ministerial Group (IMG) is functioning in the Ministry of Steel, under the Chairmanship of Secretary (Steel) to monitor and coordinate major steel  investments  in the country.
  • As a facilitator, the Government monitors the steel market conditions and adopts fiscal and other policy measures based on its assessment. Currently, basic excise duty for steel is set at 14% and there is no export duty on steel items. The government has also imposed export duty of 30% on all forms of iron ore except low grade (below Fe 58%) iron ore lump & fines and iron ore pellets both of which have nil export duty.
  • In view of rising imports, the Government had earlier raised import duty on most steel items twice, each time by 2.5% and imposed a gamut of measures including anti-dumping and safeguard duties on a host of applicable iron and steel items. In a further move to curb steel imports, the Indian government banned the production and sale of steel products that does not meet Bureau of Indian Standard (BIS) approval and to check the sale of defective and sub-standard stainless steel products used for making utensils and various kitchen appliances, it issued the Stainless Steel (Quality Control) Order, 2016 for products used in making utensils and kitchen appliances, that will help filter imports of the metal. Again, in February 2016, the Indian Government had imposed the Minimum Import Price (MIP) condition on 173 steel products. The MIP was extended thrice and ceased to be effective in early February 2017. Further, a Steel Price Monitoring Committee has been constituted by the Government with the aim to monitor price rationalization, analyze price fluctuations and advise all concerned regarding any irrational price behaviour of steel commodity.

Imports

  • Iron & steel are freely importable as per the extant policy.
  • Data on import of total finished steel (alloy/stainless + non alloy) is given below for last five years and April-Jan. 2016-17:

 

Indian steel industry : Imports (in million tonnes)

Category

2011-12

2012-13

2013-14

2014-15

2015-16

April-Jan. 2016-17*

Total Finished Steel (alloy/stainless + non alloy)

6.86

7.93

5.45

9.32

11.71

6.10

Source: Joint Plant Committee; *prov.

 

Exports

  • ron & steel are freely exportable.
  • Data on export of total finished steel (alloy/stainless + non alloy) is given below for last five years and April-Jan. 2016-17:

 

Indian steel industry : Exports (in million tonnes)

Category

2011-12

2012-13

2013-14

2014-15

2015-16

April-Jan. 2016-17*

Total Finished Steel (alloy/stainless + non alloy)

4.59

5.37

5.98

5.59

4.08

5.87

Source: Joint Plant Committee; *prov

Levies on Iron & Steel

SDF levy

  • This was a levy started for funding modernisation, expansion and development of steel sector. The Fund, inter-alia, supports :
    1. Capital expenditure for modernisation, rehabilitation, diversification, renewal & replacement of Integrated Steel Plants.
    2. Research & Development
    3. Rebates to SSI Corporations
    4. Expenditure on ERU of JPC
  • The SDF levy was abolished on 21.4.94
  • Cabinet decided that corpus could be recycled for loans to Main Producers
  • Interest on loans to Main Producers is set aside for promotion of R&D on steel etc.
  • An Empowered Committee has been set up to guide the R&D effort in this sector.
  • EGEAF  – Was a levy started for reimbursing the price differential cost of inputs used for engineering exporters. Fund was discontinued on 19.2.96.

Opportunities for growth of Iron and Steel in Private Sector

The New Industrial Policy Regime

The New Industrial policy opened up the Indian iron and steel industry for private  investment  by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are now freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of a facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario.

The Growth Profile

(i) Steel :  The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. In the last few years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to set up fresh greenfield projects in different states of the country.

Crude steel capacity was 121.97 mt in 2015-16, up by 11% over 2014-15 and India, which emerged as the 3 rd largest producer of crude steel in the world in 2015 as per ranking released by the World Steel Association, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. The country is expected to become the 2 nd largest producer of crude steel in the world soon, provided all requirements for creation of fresh capacity are adequately met.

(ii) Pig Iron:  India is also an important producer of pig iron. Post-liberalization, 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 accounted for 92% of total production for sale of pig iron in the country in 2015-16. The production for sale of pig iron has increased from 1.6 mt in 1991-92 to 9.23 mt in 2015-16.

(iii) Sponge Iron:  India is world’s 2 nd largest 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 and accounted for 89% of total sponge iron production in the country. Capacity in sponge iron making too has increased over the years and stood at around 43 mt in 2015-16.

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