`Level playing field'

Print edition : January 26, 2007

RAM VILAS PASWAN, Union Minister for Steel.-S. SUBRAMANIUM

Interview with Union Steel Minister Ram Vilas Paswan.

EXCITED about the prospects of the domestic steel industry, Union Steel Minister Ram Vilas Paswan believes that the good days are here to stay. With the opening up of the sector to private and global players to the extent of 100 per cent foreign direct investment (FDI), he is committed to providing a level playing field to all.

At the same time, he is hopeful that following the completion of its modernisation-cum-expansion programme, the state-owned Steel Authority of India Limited (SAIL) will emerge as a market leader in the coming years. He says his Ministry's view on the iron ore controversy was to conserve high-quality reserves for utilisation by the domestic industry so as to leverage the country's natural advantage in steel-making. However, he realises that the final decision in this regard will have to be taken by the Commerce Ministry. Excerpts from an interview:

What is the current situation in the Indian steel sector?

The Indian steel sector is booming. Steel use in the country is expected to grow at 10 per cent in 2006. It now occupies the seventh position globally among steel-producing countries. The production of crude steel in 2005-06 grew at 7.1 per cent, whereas consumption has been growing by 13.88 per cent, which is much higher than the projections of the National Steel Policy. The outlook for growth in demand for steel continues to be robust, with an 8.9 per cent growth in GDP during 2006-07.

The domestic steel industry, it appears, is at a crossroads in a phase of modernisation, expansion and consolidation. How do you see the sector in five to 10 years from now and 15-20 years hence?

Yes. The Indian steel industry is very vibrant and almost all major steel producers have announced modernisation and expansion plans. For example, our major steel PSU, Steel Authority of India Ltd., has announced a Rs.37,000-crore modernisation-cum-expansion plan to achieve a hot metal production of 22.5 million tonnes by 2012 from the current level of 13 million tonnes.

You might be aware that recently Prime Minister Manmohan Singh laid the foundation stone for IISCO's Rs.9,000-crore modernisation programme at Burnpur in West Bengal. The other major public sector enterprise, RINL, is already implementing an ambitious Rs.8,692-crore expansion programme at its Vizag steel plant to raise the hot metal capacity from three million tonnes to 6.3 million tonnes by 2008. Private sector steel companies have also announced expansion and modernisation programmes and some of them are in a consolidation mode.

I would like to emphasise that the public sector enterprises are not lagging behind in mergers and restructuring. The merger of IISCO with SAIL has already taken place. Bharat Refractories Ltd. (BRL), Maharashtra Elektrosmelt Ltd. (MEL) and Neelanchal Ispat Nigam Ltd. (NINL) are also in the process of merging with SAIL. Another state undertaking, Sponge Iron India Ltd. (SIIL), is merging with National Mineral Development Corporation (NMDC). Owing to these efforts, there will be considerable growth in steel production in the country in the coming five-10 years and it will be still more in the next 15-20 years, once all the expansion plans fructify.

Has the National Steel Policy made any material difference to the sector?

You see, the National Steel Policy was announced in November 2005. It is a basic policy document that has provided a framework for the growth of the steel industry and a momentum for all steel producers and consumers in the country to make their own future plans for the growth of the sector. Following the announcement of the NSP, a working group on the steel industry for the Eleventh Plan headed by the Steel Secretary examined the major sectoral policy issues and concerns and submitted its report. Based on the action points arising out of the NSP, a report on infrastructure-related issues is also being prepared.

How do you view the Indian steel sector vis-a-vis the global scenario?

During 2006, China and India again dominated the world market for steel. With an increase in expenditure on infrastructure and construction in India, the use of steel is expected to have grown at 10 per cent during the year. The medium-term forecasts have also been developed by the International Iron and Steel Institute for the period 2010-2015. Up to 2010, the global demand for steel is expected to rise by 4.9 per cent each year, whereas the annual demand growth in India and China is projected at 7 per cent and 8.4 per cent, respectively.

Projections from 2010 onwards up to 2015 suggest a 4.2 per cent annual growth in steel demand in the entire world, whereas the growth in steel demand would touch 7.7 per cent in India and 6.2 per cent in China each year.

Do you think the steel sector should be left to private players? What role do you see for the state-owned SAIL in the years to come?

The steel sector was deregulated, along with other industries, during the launch of economic liberalisation in 1991-92. The post-deregulation period has seen significant changes in the structure of the Indian steel industry in terms of ownership. Capacity creation during the last decade following deregulation has taken place entirely in the private sector. The private sector now accounts for 59 per cent of the country's total crude steel production, compared with 37 per cent in 1992-93 and 71 per cent of the entire finished steel output, compared with 67 per cent in 1992-93.

We have set a target: by 2020, SAIL and RINL should maintain their current market shares, if not increase them. The current policy of the UPA government, as laid down in the National Common Minimum Programme, is for a strong and effective public sector, whose social objectives are met by its commercial functioning. So, one can visualise the coexistence of both public and private sectors in the Indian economy.

As I mentioned earlier, SAIL is embarking on a massive modernisation/expansion programme and it will become the biggest steel-producing company in the country in the years to come, with a lot of in-house integrated facilities following the merger of BRL, MEL and NINL with it in the near future. SAIL will also have a competitive advantage in the special and alloy steel category on completion of the proposed investments in its special and alloy steel plants located at Salem, Bhadravati and Durgapur. I am hopeful that SAIL will become a market leader.

Do you think all the proposals by POSCO, the Mittals and others for setting up greenfield steel plants will actually come about? If not, do you feel that these companies are actually eyeing the rich iron ore deposits, which they want to utilise for their plants abroad?

I would like to mention here that 100 per cent FDI is allowed in the steel sector. Any foreign company which is willing to set up shop in India may do so. In fact, as you may be aware, both domestic and foreign investors have shown a great deal of interest in setting up steel capacities in the country.

Altogether, 116 MoUs [memoranda of understanding] have been signed in various States for an intended capacity of around 150 million tonnes, with an investment of Rs.3,57,000 crores. POSCO and the Mittals are among the companies that have signed the MoUs. I understand that the POSCO India project has been started by the Korean steel major in Orissa. I hope the State governments take all steps to facilitate these projects. We are committed to providing a level playing field to both the domestic and foreign players.

What is the Ministry's official position on the export of iron ore and how is the government planning to tackle the controversy?

The matter is under the consideration of the Union government. The Commerce Ministry is expected to finalise a decision on this issue, as export is their subject matter. We would like to conserve iron ore, particularly of the better quality, so that the steel industry could leverage this natural advantage and the projected investments in this sector take place.

How serious is the problem of lack of good-quality coking coal supplies and how do you plan to overcome it?

India has very limited resources of coking coal. Despite the presence of high-quality iron ore reserves, the domestic steel industry's growth is constrained owing to the shortage of coking coal. Steel producers thus have to supplement the domestic production of coking coal with imports.

Tata Steel has captive coal mines and washeries to meet its coking coal needs partially. But the public enterprises such as SAIL and RINL do not have captive mines and they rely on Coal India Limited for their indigenous coking coal supplies, coupled with imports.

In view of the growing requirement of quality-coking coal, a committee has been formed under the chairmanship of P.K. Bishnoi, Director (Finance), RINL, with members from SAIL, NTPC, CIL and Coal Videsh to explore options for securing sustained coking coal supplies for SAIL and RINL. We are examining the Committee's recommendations.

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