Govt faces uphill task for 300 mt steel output target

20 Mar 2017

The draft National Steel Policy has set a target of 300 million tonnes (mt) capacity by 2030, which would require 91,000 acres additional land.

The policy — put up on the ministry website for public viewing — acknowledges that land requirement is based on green field expansion. The draft mentions the growth plans of Indian steel industry, which has been hindered by difficulties in land acquisition and many projects are stuck due to policy and procedural issues. To achieve the target, therefore, the ministry plans to coordinate with the state governments to ensure timely availability of litigation-free lands to the industries.

Secretary General of Indian Steel Association, Mr.  Sanak Mishra said around half the capacity of the additional 178 million tonnes would be through greenfield expansion and the thumb rule for land requirement is 1,000 acres for one million tonne of steel capacity. Hence, the 91,000 acres for the additional capacity. The current installed capacity is about 122 million tonnes (mt). But, over the past decade most of the addition in capacity has come through brownfield expansion due to hurdles in land acquisition. The ratio of expansion through brownfield to greenfield would be 60:40, said Mishra. “Crude steel capacity in India in 2005-06 was around 45 mt. In 1991-92, it was 22 mt. It means in the last 25 years, we have added 100 million tonnes,” Mishra pointed out.

Yet the battle for land rights across the nation has stalled many steel projects. In 2005-06, mega greenfield projects that were announced added up to 100 mt capacity, including the ones of Posco and Arcelor Mittal. In recent times, the only greenfield project of significant size to be commissioned was Tata Steel’s Kalinganagar project.

Sushim Banerjee, director general, Institute for Steel Development and Growth, however, pointed out that the bigger worry, going forward, could be market absorption.

Domestic demand has been a cause of concern for the industry. Larger players have remained somewhat insulated from this problem because of measures initiated by the government to curb imports and a strong export market. But it may not be an incentive for players to set up greenfield plants, especially foreign players. During April to February, consumption has increased at a disappointing rate of 3.39 per cent to 76.2 mt.

A case in point could be Arcelor Mittal. The world’s largest steelmaker may have faced land acquisition problems in Odisha but in Karnataka it had the land in place, said sources.

It pulled out of the project due to the global steel crash. A muted domestic demand is not much of a help either. The industry feels that a domestic steel procurement policy should be finalized to encourage making steel in India.

Source – Business Standard