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| Firmness returning to the steel market |
| Kunal Bose / Jun 23, 2009, 00:52 IST |
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The US practice of setting an agenda for the first 100 days of working of a new administration has caught on with us, whatever the merits of the exercise. But it must be said in favour of Virbhadra Singh that what he is setting out to achieve for the steel ministry in a three-month time period is extraordinarily practical. Thankfully, the focus of Singh’s agenda is to complete some programmes of strategic significance for our steel industry. A few are hanging fire longer than should be the case calling for spirited intervention by the ministry.
No doubt fortune is favouring Singh whose accession to the office coincides with signs of stability, if not some firmness returning to the steel market. For instance, helped by improved offtake by the construction and automobile sectors, the country’s steel consumption rose 6 per cent to 8.22 million tonnes during April and May compared with the same two months in 2008.
Prime minister Manmohan Singh says while we cannot be immune to developments outside, the Indian economy has the resilience to grow at the rate of 8 to 9 per cent. What is of particular significance for steel is the government’s disposition to provide more resources for infrastructure and the cost of bank finance becoming cheaper.
According to SAIL chairman Sushil Roongta, India is at a stage of development where the demand for steel, sans exceptional circumstances, will rise at a rate higher than the GDP growth rate. Roongta’s observation is buffeted by our steel consumption growing 10.1 per cent in 2007-08 when our steel imports rose 41 per cent to nearly 7 million tonnes.
Global economic meltdown since July last saw world steel production contracting 1.2 per cent in 2008. But India was in the same group as China and South Korea to have been able to raise production last year. World Steel Association tells us that Indian consumption this year will rise 2 per cent when global use of the metal is to decline 15 per cent. Hopefully, Indian steel demand will be much stronger than what has been forecast by WSA.
In order not to make India very steel import dependent, as economic growth speeds up from here, the ministry will have to play a proactive role in fine tuning policies and making concerned agencies at the state and central levels to work in unison so that all capacity expansion programmes make smooth progress. Even if the ministry performs to Virbhadra Singh’s expectation, achieving a capacity of 124 million tonnes by 2011-12 will be nothing short of a miracle.
One will go with Roongta that brownfield expansion programmes of his group, Tata Steel, Vizag Steel and the rest will sail through, notwithstanding difficulties in raising finance. In fact, as Roongta suggests the decision by world steel leaders not to start building new capacity at this point has opened up an opportunity for the likes of SAIL to procure machines for expansion at better rates than earlier. Mr Singh has proved to be the harbinger of good news for both the steel makers under its tutelage and also NMDC. Nothing could be more satisfying for Roongta than Jharkhand giving the nod to the ministry’s logical urgings that the change in ownership of Chiria leases encompassing deposits of around 2 billion tonnes be transferred to SAIL following IISCO’s merger with it.
Such is the size and quality of Chiria deposits that it is only to be expected that these are to be eyed by third parties promising to build steel mills in Jharkhand as long as ownership confusion remains. Hopefully all this is now over and the disputes over the four mining leases will be settled in favour of SAIL.
For Bhilai Steel Plant, the 100-day agenda brings happy tidings since the ministry will step in to expedite the final clearances for getting lease ownership of 511-million-tonnes iron ore deposit at Rowghat F block.
BSP MD R Ramaraju is not stopping there. He has already made first moves to acquire Rowghat A to E block deposits of 250 million tonnes. BSP will need all that to support its major capacity expansion programme.
Singh is also pushing iron ore miner NMDC into forward integration. The next three months will see NMDC coming closer to kicking off work on building a 3-million-tonnes steel plant in Chattisgarh, from which SAIL and RINL dropped out earlier. The minister also wants NMDC chairman Rana Som to revive the fortunes of SIIL by way of capital infusion and capacity expansion. No doubt Som is ideally placed to do all this with NMDC reserves of Rs 11,204 crore at this command.
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