CHAIRMAN's DESK

" ... I am reminded of the famous saying by Victor Hugo that 'nothing in the world can stop an idea whose time has come'. Well, it appears that the time of steel has come and there is no stopping the growth of the industry ... "

As we commence the new year with a special issue of the JPC bulletin for January, 2005, I cannot but reflect on the momentous developments which have taken the steel industry by storm in the past year. Steel in general has been at an all time high with prices reaching unprecedented proportions, reflecting a tremendous boost in demand worldwide. This is indeed music to the ears of our producers who have been down in the dumps for the past many years. Indeed, steel is symptomatic of the tremendous optimism, which has surged through the economy during the past year. All steel companies including the public sector have registered impressive performances and there is a reasonable likelihood that the good times will continue for at least a few more years.

There is a tide in the affairs of men, which according to Shakespeare, taken at the flood leads on to fortune. It is heartening to note that "a number of progressive steel companies are indeed riding this wave of buoyancy and laying the foundation for expanding their presence both in terms of capacity and products. Tata Steel has realizable ambitions of becoming a 15 million tonne behemoth by 2010 while SAIL has devised a corporate plan for reaching 20 million tonnes by 2011-12. A large number of International conglomerates have shown keen interest in investing in the steel industry in India and for the time being Orissa seems to be the focus of the gold rush. What is indeed most gratifying is the fact that India is firmly on the world map not only in the knowledge based industries of IT and telecommunications but also brick and mortar industries like steel. I was most impressed recently while attending a joint IISI/OECD conference in Paris when the former CEO of Arcelor emphatically stated that the world should not under rate India's potential and once China peaks in a few years, India will be the next global super power which will be the diver of growth in the steel industry. Indeed, India's time has come and all possible indicators of economic performance seem to herald an impressive growth of our economy in the years ahead.

There are still a number of major policy bumps and glitches, which need to be ironed out both at the Centre and the State levels. The largest area of concern in our case remains the non-availability of coking coal which is an essential raw material for production of steel through the blast furnaces (BF) route. Even though there is a lot of talk of developing alternative technologies, the fact remains that the BF route is the most established, economical and trustworthy route for making steel. In our draft National Steel Policy, we have estimated that approximately 60 per cent of growth in capacity in the future will come through the BF route. IISI/OECD are confident that the present world shortage of coking coal will disappear in the few years since major new mines are under development.

We are comfortably placed in respect of iron ore though there is still a large section of industry, which feels that we have not got our act together in framing a realistic iron ore export policy, which takes into account the growth needs in the future. Besides the fact that there are a. number of small time private producers who are firmly entrenched in the iron ore mining business, the basic reality is that we have adequate proven iron ore reserves for at least 200 years. Another inescapable fact is that the mechanics of production results in a larger generation of fines (approx. 80%) than the lumpy ore, which is used in the conventional BF route for making steel. Till we develop our own capabilities to utilize these fines either through pelletisation or through sintering facilities, we really have no option but to export iron ore fines which in the past have generated huge mounds of potentially hazardous material that was polluting the atmosphere, flowing into our river basins and destroying the flora and fauna. Indeed, the export of these fines is inescapable both as an economic and environment necessity till we are able to develop the required processing facilities.

Another major area of concern is the inordinate delay in issue of sanctions for mining leases including renewal of existing leases. We have estimated that over 200 million tonnes of additional iron ore production will be necessary if we are to reach our goal of producing 100 million tonnes by 2020. Our past history in obtaining environment and other clearances is not very encouraging and though the Ministry of Environment & Forests has attempted to put in place a reliable fast track mechanism for clearances, we have yet to experience the results of this initiative. The presence of a reliable and efficient system of clearance will make a major difference in infusion of foreign capital into the industry.

One area where India has firmly arrived on the world map is the fact that our producers are able to match the best quality of steel produced in the world. We are also among the most cost competitive, particularly up to the stage of making molten iron. These are achievements to be proud of and indeed there would be nothing to hold us back in case we could get our infrastructure act together. There are encouraging signs of massive infrastructure development plans. in the areas of ports, roads and electricity. Our rail facilities also
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need considerable augmentation if we are to successfully move about 400 million tonnes of raw materials and finished products by 2020 when we expect our production capacity to reach 100 million tonnes.

Finally, a word about steel prices, which many say, are literally on fire and have upset the production and growth plans of a number of downstream users and average consumers of steel. There is no denying that domestic prices are at an all time high but it is necessary to appreciate that these are riding tandem with even higher international prices. Input costs have also gone up though perhaps it cannot be emphatically stated that rising input costs are the main drivers of high prices. Nevertheless, the concerns expressed by consumers are real and the Government has responded in the recent past by drastically reducing duties across the board in the steel sector. This may not be an adequate response but the bottom line remains that prices are market driven and the only answer is more capacity addition and higher production. In any case, there has been a radical up turn in the health of the industry and this auger well for the growth of the economy in the future.

As I sign off, I am reminded of the famous saying by Victor Hugo that 'nothing in the world can stop an idea whose time has come'. Well, it appears that the time of steel has come and there is no stopping the growth of the industry.

( J P Singh Joint Secretary, Ministry of Steel & Chairman, JPC)
(This is excerpted from JPC Bulletin January' 05)