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CHAIRMAN's DESK

" ...As of now, the industry is going through a boom. Demand is buoyant and prices are also very comfortable..." The general public outcry against rising steel prices forced the Government to react by reducing the customs duty on non-alloy steel from 10 per cent to 5 per cent and duty on ships for breaking from 15 per cent to 5 per cent with re-introduction of CVED as well as reduction of duty on melting scrap from 5 per cent to zero per cent. These policy measures were supposed to serve a dual objective. Firstly, the general reduction in duty levels was meant to send a signal to the market that steel prices should be contained and kept within reasonable limits. The major producers responded positively by bringing down prices from Rs.600 per tonne to Rs 2000 per tonne. Secondly, the move to reduce duty on ship breaking as well as melting scrap is designed to increase the availability of long products in the country. These are the main products, which are consumed by our local industry and small-scale domestic consumers. Out of a gross production of about 36 million tonnes (including downstream consumption of secondary producers) - long products account for 15 million tonnes. Out of this, the share of the secondary sector is around 60%, i.e. 9 million tonnes. The ship breaking industry till recently was a major contributor at over 3 million tonnes per annum but due to the high duties on ship breaking as well as the incentives provided by neighbouring countries like China and Bangladesh, our industry has fallen to third place. The reduction in duty is an attempt to revive this industry since over 80 per cent of the output of broken ships is re-rollable scrap, which is a direct input material for the re-rolling industry. Furthermore, the ship breaking industry is vital for the economy of the western region since there are no major steel producers in the region. Reduction of duty on the melting scrap is expected to make it easier for our producers to access scrap in the international market. Indeed, the issue today, which is in every body's mind, is the huge shortage of metallic in the country and the sprouting of sponge iron units particularly in the eastern region is a significant pointer to the huge demand which is building up for metallics. It seems that the sponge iron route is the only viable route, which will have to make good the shortage of metallics both for the blast furnace industry and electric furnace industry. As of now, the industry is going through a boom. Demand is buoyant and prices are also very comfortable. There is a general feeling that these conditions will remain at least till 2008 because the Chinese demand will remain firm at least till the onset of Olympics. It is, therefore, time for the industry to swing with the tide and achieve its expansion plans. Already a lot of interest has been shown not only by the domestic industry but also by foreign players in setting up steel units in Orissa primarily because of the availability of iron ore mines in that area. The State Governments and the Centre will have to playa pro-active role to see that these investments fructify and we are in a position to meet increasing demand in the years to come. This will need an appropriate change in mindset at all levels because time is the essence and we cannot afford to miss this golden opportunity. ( J P Singh Joint Secretary, Ministry of Steel & Chairman, JPC) (This is excerpted from JPC Bulletin August' 04)