Achieving steel capacity of 124 MT by 2012 doubtful

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30 Sep 2009

Honestly, there are not many takers for the government projection of India achieving a steel capacity of 124 million tonnes in the next three years and 150 million tonnes by 2015. Doubts of capacity doubling in three years arise as none of the big-ticket investments promised by some major foreign and domestic groups has been off the ground for one reason or another.
They are not to risk investments of Rs 50,000 crore and more in a steel mill of 12 million tonnes capacity till they have sewed up all the required land without making enemies of the local population, got linkages to iron ore and coal mines and found a supportive infrastructure. Mind you, the big constituents of the world steel industry came rushing here when the steel sector was in the bull phase and the subsequent meltdown was not on anybody’s radar.
Our Steel Minister Virbhadra Singh says he has not taken into account the “promised capacity creation by ArcelorMittal and Posco” while working out the 2012 target of 124 million tonnes. But how will then the capacity leapfrog to that level in three years? Singh, as we understand, is setting great store by capacity addition through the brownfield route where progress thankfully has not been dimmed by the market mayhem.
Singh seems to have no doubt that the industry will be creating nearly 33 million tonnes of additional capacity by already operating mills in the next three years. As he is pleased with Tata Steel commissioning a 1.8-million -tonne blast furnace and JSW Steel a 3-million-tonne one at their current operational sites last year, Singh believes that SAIL and Vizag Steel will usher in brownfield capacity of 12 million tonnes and 3.4 million tonnes, respectively, by the target time.
Also expect the capacity of Jamshedpur mill of Tata Steel to rise to 10 million tonnes by 2011 from 6.8 million tonnes now. Tata Steel is investing nearly Rs 14,000 crore on this final phase of steel capacity expansion at Jamshedpur and on auxiliary facilities, including mines. Quite a few others, including Essar and JSPL are also on the way to become bigger at their present sites.
SAIL Chairman Sushil Roongta with the industry’s single biggest budget for expansion is in the meantime making the best of the thinning order books of machinery and equipment makers for the steel industry. To the extent that machinery orders are still to be finalised or placed by SAIL, Roongta is negotiating hard to get maximum discount on the listed prices.
The other Indian steel makers are also doing the same. Machinery makers in Europe and the US are desperate to get new orders from us, what with steel production in many places having contracted up to 40 per cent in response to demand meltdown. China is also a contender for machinery orders from here.
Singh says 124-million- tonne capacity will not look distant if we consider the good progress made by many greenfield ventures in the capacity range of 500,000 to 1 million tonnes. Some much bigger new mills, particularly in Orissa, are reportedly making progress to the minister’s satisfaction. Why also not consider the “growth of the secondary sector, including sponge iron, induction furnace, arc furnace and rolling mills. It is adding to the country’s steel capacity,” asks Singh.
But he cannot but be aware that the country’s steel self-reliance in the long run will depend on our commissioning new steel mills. The principal hurdle in starting work on a project of the size proposed by ArcelorMittal is to acquire up to 10,000 acres of contiguous land without causing social disharmony.
Brought up in the Nehruvian tradition, Singh says the unravelling of the land tangle calls for going beyond offering one-time financial compensation to land givers. There has to have an annuity for those giving land to accommodate steel mills. Singh wants investors to make local people job worthy by imparting relevant skills.
Industry constituents are not trying to trick villagers out of land ownership. But why then are they not making progress on the land front. While the issue has become politicised, some overzealous non-governmental organisations will queer the pitch when it comes to acquiring land for industry.
The rapidly growing domestic market for steel is no doubt an incentive for investors. But finally the abundance of iron ore and thermal coal are what enticed Posco and ArcelorMittal to come here. It is small consolation that what ArcelorMittal has got so far are two coal deposits for its captive power requirements.
Any idea how many years SAIL had to wait before it recently got final clearances for the over 510-million-tonne Rowghat iron ore deposit in Chhattisgarh? Roongta tells us 25 years. Let others do not experience the same.

Source: Business-Standard