Steel on Stilts? – Chawm Ganguly


The Rupee is on a free fall. And naturally, in its wake, it has dealt a body blow to all industries dependent on imports. Take metallurgical coke for instance. This vital raw material for those producing steel through the blast furnace route is rising, reflecting the Rupee-Dollar dichotomies.  While the merchant coking coal companies are trying their level best to pass on the hike, despite all the resistance from the end users, it is not immediately possible for the steel makers to increase their prices. In situations like these, both segments claim to be the victim, accusing the other while in reality both have to take the hit, grit their teeth and wait for the storm to pass, hoping against hope.

For the embittered steel sector, this is akin to the last straw, suffering as it is from a series of misfortunes that are showing no signs of abatement. Just a few years back, riding on the crest of optimism, the industry was talking of huge Greenfield and Brownfield investments that were not only expected to etch the India name firmly on the global steel producing map, but also to set right the abysmally low per capita consumption. Since then, environmental concerns, supply security of raw materials and issues relation to land acquisition have ensured that many of the projects that were flagged off are put in the backburners, if not scrapped altogether.

With new investments drying up, a global recession softening demand and prices, the existing industry is literally gasping for breath which in turn has a huge impact on the economic development of the Nation itself. With the very core of the economy throttling towards an impending meltdown, how will the Nation shrug off the veil of recession and kick start its agenda towards development was a question that was annoying many a pundit? The pall of gloom that was spreading like cancer as each passed on its woes to its ancillaries and dependents and the depression was worsening. “2014 is an election year, and whoever comes to power, and we cannot rule out the possibility of another mess brought about by the lack of clarity of the mandate, will need another year to settle down before the bold decisions required to shock the sector out of its lethargic slumber are taken” was the common refrain. The Central Government was forced into policy inaction by “pollution and corruption” and industry   experts opined that there was precious little to be done, except adopting a wait and watch policy.

However, proving all skeptics wrong, the Prime Minister has set the ball rolling. A meeting of the High Level Committee on Manufacturing was held recently which discussed the major issues at hand with a view towards addressing them and mitigating the adversities that are plaguing growth. The meeting was attended by all the Ministers and officials of departments relating to the manufacturing sector including the Ministers of Science & Technology, Heavy Industry, Civil Aviation, Steel, Textiles & MSME and the Deputy Chairman of the Planning Commission. The discussions revolved around the proposals made by the National Manufacturing Competitiveness Council which were presented by the Chairman,  National Manufacturing Competitiveness Council Dr V. Krishnamurthy .

Industry watchers will be happy to note that one of the major topics of discussion in the meeting was Growth strategy for Steel Industry where a new target was also set: Targeting 300  the million ton output. The growth strategy endorsed at the meeting aims at the production of 300 million tons of steel by the middle of the next decade. In the short run, pro-active facilitation of projects in the pipeline would be taken up on priority jointly by the Steel Ministry and the new investment facilitation mechanism in the Cabinet Secretariat. SAIL would leverage its existing infrastructure to substantially expand capacity. It would work out its plans for capacity expansion and production of speciality steels by 30.9.2013. A Master Plan for achieving 300 million tons of production would be prepared.

Identifying the main grievances of the industry, the meeting opined that as the private sector finds it difficult to assemble land and get clearances, the state would assume a pro-active role in partnership with state governments. Project specific SPVs would be floated for identified sites which would assemble land, get necessary approvals and clearances and tie up water and raw materials. The SPV would then be offered in a transparent manner for takeover by investors through a bidding process. The Steel Ministry would prepare a road map with time lines for the above in 8 weeks.

The move though a bit late in the day, has been hailed by the industry which feels that the onus will now shift to the Center and the States and the industry can concentrate on production as opposed to running from pillars to post for clearances. However the skeptics are still non-committal pointing out that resolutions arrived at in meetings, however lofty need to be translated into action and that with their cup of woes already brimming over, waiting for such actions to happen itself is a pain.

The immediate fallout? Expect nothing, though the medium and long terms looks promising at least on the basis of the sounds being made.