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The Associated Chambers of Commerce and Industry of India (Assocham) has urged the Centre to increase iron ore supply for domestic steel industry, which is currently running at very low capacity due to raw material problem.
According to the apex industry body, such a move would bring down steel imports worth a whopping $6 billion, promote steel exports and curb the current account deficit (CAD).
"Iron ore exports of 100 million tonnes (mt) would earn India $10 billion, while the country would earn $8-9 billion through exports of just 10 mt steel. Besides, value addition to the raw material would lead to employment generation, capacity building and various other benefits," highlighted a study titled "Iron Ore Exports: Threat for Indian Steel Industry" conducted by Assocham.
"Rupee depreciation has made domestic steel sector 22 per cent more competitive, giving a huge impetus to exports of finished steel. On the other hand, relaxing the exports restrictions on iron ore would further worsen India's CAD," said an Assocham spokesperson.
Stating that both demand and production of steel is growing steadily, the study projected India's steel production might reach 81 mt in the current year against 78 mt in 2012-13. This necessitates supply of about 140 mt of iron ore. In contrast, the iron ore output in the country, which is on a decline, is expected to remain in the range of 100-110 mt, bringing in a shortfall of 30 mt. "Thus, any relaxation of iron ore export duty will further worsen the situation, thereby making it difficult for domestic steel producers to survive," said the chamber's spokesperson.
Owing to the unavailability of iron ore, capacity utilisation of crude steel in India has come down to about 82 per cent from 88 per cent a year ago, the Assocham study noted. Rampant shortage of iron ore has also led to huge imports of iron and other steel-making raw materials. In FY13, India imported various metallics worth $9 billion for iron ore and steel industries, thereby increasing the CAD significantly.
"There has a sudden jump of 66 per cent in import of scrap from about 5 mt in 2011-12 to over 8 mt in 2012-13," said the study. "Likewise, there has been a huge jump of 1,475 per cent in import of direct reduced iron (DRI) and hot-briquette iron (HBI) - from less than 50,000 tonnes a year ago to over 750,000 tonnes in the current year," it added.
According to the data compiled by Assocham, India has ample of agglomeration capacity as pellet plants capacity is likely to reach 85 mt by 2014-15 from about 64 mt in 2012-13. Similarly, sinter capacity is also scheduled to grow to 86 mt by 2014-15 from current level of 75 mt.
Therefore, the justification of the exporters that iron fines are being exported because India does not have the capacity to use them is a myth, the report stated.
Considering that iron ore production in the country is likely to drop, the production of fines will remain at 60 mt in the current year, against 88 mt in 2012-13 and hence, pellet and sinter plant will continue to operate below rated capacity, the study projected.
In view of the massive steel requirement for infrastructure development, there is a need to significantly increase steel production capacity in India, the report noted.
