The year 2015-16 was an eventful one for the Country and also the Indian steelindustry. While almost all the major economies of the world witnessed sluggish growthIndia emerged as the world's fastest growing major economy. As far as steel is concernedthe year also witnessed India going ahead of the United States of America to becomeworld's 3rd largest steel producing nation.
During the year India was the only major steel consuming market in the world whichexhibited a growth. However due to the oversupply scenario globally there was anunprecedented surge in imports which increased by 27% over 2014-15 and by 123% over2013-14. In fact the increase in net imports in the year was more than the increase indomestic steel consumption. These imports often at predatory prices forced significantprice cuts by the Indian steel producers leading to severe margin squeeze.
I would like to thank the Government of India for stepping in at this critical junctureand undertaking necessary corrective trade measures. The Government introduced the MinimumImport Price (MIP) mechanism in February 2016 to curb dumping of steel in the Country.But for this step the steel industry would have been reeling under a lot more pressure.However as per the projected demand-supply situation global oversupply would persist inthe near future and there is a need for protracted trade measures to provide the Indiansteel industry with a level playing field.
I would like to emphasize that while these trade measures are essential in the presentcontext the long term competitiveness of the steel industry in India will depend onamongst other providing the Indian steel
industry with a level playing field vis-a-vis other major steel producing nations withrespect to freight rates cost of borrowing regulatory costs and availability of energyat competitive prices.
With this backdrop the year 2015-16 was an extremely challenging one for your Company.The free fall in steel prices to a historic low had an adverse impact on profitability ofSAIL. While production of hot metal and crude steel was the highest ever a commensurateincrease in production of saleable steel and sales could not be achieved due to thedepressed market condition and a major shutdown taken for upgrading the Hot Strip Mill inour Bokaro Steel Plant.
However I am confident that the worst is behind us and your Company would turnaroundin this financial year as most of the enablers are in place. Ramp-up of production fromour new Units under modernization and expansion plan is not just increasing production andleading to better quality but has also helped us in reducing cost of production. Higherproduction from the new efficient Units and rationalizing production from cost intensiveroutes have manifested in the form of a reduction in variable cost of production by 10% inQ4 compared to Ql of 2015-16 and the same trend continues. This financial year we havetargeted to increase our production and sales by more than 20% over last year.
The products being manufactured by our new rolling mills have been received well by thecustomers and it is our constant endeavor to add more and more value added grades fromthese mills. In conjunction with increased production focus is being given to efficientand strategic marketing for improving sales and
realisations. More emphasis is being given on marketing in regions where we havenatural freight advantage increasing retail sales and leveraging the brand image of SAIL.
In this year we shall be completing the balance modernization and expansion projects inour Bhilai Steel Plant. The facilities include a state of the art Universal Rail Millcapable of producing the longest single piece rail in the world. Commissioning of thismill would provide SAIL with the capability of producing high quality rails to meet therequirements of the Indian Railways Metro projects dedicated freight & passengercorridors as well as the exports market.
Besides the ongoing Modernization and Expansion Program which is on the verge ofcompletion we have taken up new projects to improve our product mix and profitability.The significant one being installation of a 3.0 MTPA capacity 2250 mm wide Hot Strip Millin our Rourkela Steel Plant. This mill scheduled to be commissioned in 2018 will enable usto produce very high quality hot rolled coils including advanced high strength grades forthe growing automotive industry in the Country.
With regard to the raw materials security of your Company the entire requirement ofiron ore is being met from the captive mines. The capacities of existing iron ore minesare being expanded and new iron ore mines are being developed to meet the increasingrequirement of iron ore. We have been allotted the Parbatpur Coking Coal block inJharkhand which will add to our coking coal security. We intend to commence productionfrom this block at the earliest after the approval of the revised mine plan based onsimultaneous extraction of coking coal by SAIL and Coal Bed Methane (CBM) by ONGC.
Your Company has always been in the forefront in preservation of environment andsustainable development. In this direction SAIL Plants have taken various initiatives toreduce environmental footprint and minimising emissions. In addition the state of the artfacilities installed under the current Modernisation & Expansion Program has led tosignificant improvement in environmental parameters enabling us to produce steel in agreener and more environmental friendly manner than before. Realizing the significance ofplantation in overall environment till date close to 2 crore trees have been planted inSAIL Plants and Mines locations with more than 4.6 lakh trees planted in 2015-16 itself.
Despite the present challenges India's long-term outlook for the steel sectorcontinues to be bright. The Government of India is taking appropriate steps to bolster thegrowth of the sector. In the Union Budget 2016-17 a sum of ' 218000 crore hasbeen earmarked for infrastructure like roads and railways. Such a scenario augers well forthe domestic steel sector. Other initiatives of the Government such as Housing for All by2022 Power for All by 2019 100 Smart Cities by 2022 and Atal Mission for Rejuvenation& Urban Transformation (AMRUT) are likely to drive steel demand in the Countrysignificantly.
In conjunction with the initiatives by the Government for increasing steel demand itis our responsibility as the leading steel producer in the Country to increase steelconsumption through initiatives like increasing the steel intensity in construction andinfrastructure projects by propagating the advantages of steel over other materials withrespect to Life Cycle Analysis based costing assured quality safety and pace ofconstruction. We are taking a special drive towards this initiative. As the per capitasteel consumption in the Country increases from the current 61 kg even to the worldaverage level of 208 kg there is no looking back for the Indian steel industry.
Finally I would like to take this opportunity to thank you as the shareholders of theCompany for your constant support and trust. I would also like to thank our customerssuppliers the Central and the State Governments and our employees who have always stoodby the Company and I look forward for their continued support in the future.
Place: New Delhi
Dated: 11th August 2016