CHAIRMAN’s DESK JUNE 07

One of the major events in the calendar of the Indian steel industry – the meeting of the Steel Consumer Council (SCC) – has taken place on the 20^th of August under the able stewardship of the Steel Minister. This was the twenty-first meeting of the Steel Consumers Council. The SCC provides an interactive platform for the producers, the consumers, the government and other stake-holders for discussing their problems and ultimately striving to reach at a mutually beneficial solution. The deliberations in these meetings provide important insights for policy formulation and other administrative decisions – both at the national level and firm level. The feedback received from the consumers – big or small – enable the producers to reformulate their corporate strategies to meet the demand of the consumers more effectively and adjust their supply in respect of product-mix, distribution and pricing to suit the needs of the consumers. At another level, the purpose of this council is to advise and assist the government in matters relating to steel availability quality and the market trends.  At the national level, the interchange of views among the stakeholders enable the government to fine-tune its fiscal strategy relating to the steel sector, take steps to minimize the adverse effect of market imperfections by eliminating information gaps and create conditions conducive to competitive interplay of forces of demand and supply.

            The last session of the SCC (the twentieth meeting) deserves special mention in respect of two land-mark decisions taken in response to the suggestions of the participants. Firstly, on the basis of the serious reservations expressed by the steel consumers regarding volatility and steep rise in steel prices, the Ministry of Steel set up a Steel Price Monitoring Committee (SPMC) in November 2006. The core agenda of the SPMC is to monitor price movement of critical steel products, to discuss and analyze the variations in prices and based on such analyses recommend strategies regarding steel production, consumption and trading.  As Chairman of the SPMC, I am happy to announce that three extremely fruitful and thought provoking meetings have been held so far.  Of late the membership has been expanded following directives of the Parliamentary Standing Committee on Coal & Steel to include representatives from Railways and NMDC.

 In a deregulated market environment, the Committee does not have the mandate to regulate prices.  But it has at its disposal the most potent instrument of diplomatic persuasion based on reason, a sense of fair play and mutual benefit born out of enlightened self interest. It is our experience that the inter-change of ideas and information amongst the members of the SPMC and the transparency imparted by such interactive sessions has helped in making the producers appreciate the consumers’ point of view.  The stability in steel prices witnessed in the last few months, especially the restraint shown by the PSUs and other major producers, can probably be attributed in part to the common forum provided by the SPMC for discussions among the different segments of the producing and consuming industries.

            The other major decision resulting from the last SCC meeting related to distribution of steel to reach the remotest corners of the country through a network of dealers positioned all over the country. The basic idea is to make quality steel available at fair price to the smallest of the small consumers in the country. It was felt that apart from the large scale business-to-business transactions, such grass root level transactions would popularize use of steel in rural and semi-urban areas. By familiarizing the general populace with the advantages of using a superior material such as steel vis-à-vis other materials, this would promote consumption of steel in all economic activities of the country and sustain the growth of the Indian steel industry in the long run. Considerable work has been done in this direction in the last one year at the behest of the PSUs under our Ministry.  Some statistics presented by SAIL show that as on 1^st August 2007, barring one district in Mizoram 602 districts of the country have been covered by around 1100 dealers under this scheme. Moreover, as a part of its ‘Corporate Social Responsibility’ SAIL has undertaken to deliver steel at the district Head Quarters free of transportation cost. We believe that this massive effort for popularizing the use of steel by reaching it to the small fabricators and builders will pay a rich dividend to the industry in the years to come.             In addition to the dealership scheme, the Main Steel Producers in the Public Sector are in the process of opening stock-yards in the capital cities of each and every state of the country. I am sure such expansion of the distribution network would go a long way in the promotion of steel consumption across the country and especially in India’s rural economy.

            Today, India is the 5^th largest producer of steel in the world, but our per capita consumption at around 40 Kgs continues to be abysmally low. The wider distribution network and the efforts by the SPMC to provide full price information for optimum purchase plans by the steel-users will hopefully lead to higher steel off take and hence higher steel intensity of economic activities. On the supply side, the surging investment intentions would indicate that the optimistic demand scenario is endorsed by the investors. The 9% GDP growth rate envisaged in the Eleventh Five Year Plan, the expected investment ratio of more than 35% and the IIP growth of 10% -12% - all indicate that Indian steel consumption and supply are poised for a great leap forward. 

            At this crucial juncture, Steel Consumer Council has a crucial role in advising the steel fraternity and providing an effective road map for the growth of the industry along socially desirable lines. 

K A Singh Deo                           

Joint Secretary                        

Ministry of Steel                           

& Chairman, JPC