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CHAIRMAN’s DESK MAR 07

The Indian steel industry is on song today. Production of steel in India has sustained a double-digit growth rate of 10 per cent per annum for the past five years. According to the latest estimates of the JPC, finished steel production (non-alloy) in 2006-07 at 49.39 million tonnes was 10.9 per cent higher than the production of 44.54 million tonnes in 2005-06. Consumption likewise has increased by 11 per cent - from 39.41 million tonnes in 2005-06 to 43.74 million tonnes in 2006-07.  Going by the projected macro-economic developments of rising investment rate, higher levels of capital formation and acceleration in manufacturing activities backed by strong GDP growth rate, demand for steel in India is slated for a sustained rise in the next five – ten years. The Eleventh Five Year Plan forecasts an average annual growth rate of 10.2 per cent  in steel demand in India till 2011-12.    Prospects of a growing domestic market space, geographical proximity to some of the structurally steel-deficient economies of the world, availability of essential raw materials and an enviable skill base - have attracted both overseas and domestic capital to this sector in no mean measure. This enthusiasm is evident in the spate of investment proposals for creation of steel capacity – both green-field and brown-field – received by the mineral-rich states in the last few years. All this is good news for the Indian economy and for the people of India. We expect that the steel industry with its powerful and pervasive forward and backward linkages with the rest of the economy will set in motion a virtuous cycle of economic growth, enhanced investment and employment. Apart from generating direct employment in the new projects, the economy-wide multiplier effect of investment in steel industry would create productive employment opportunities in upstream areas of mining, project engineering and capital goods manufacturing and also in the downstream activities of manufacturing, construction and other steel-intensive production processes. The ability of all these commodity sectors to absorb semi-skilled and unskilled work force is significantly higher than service sector activities that have been driving economic growth in the last decade and a half.    On the flip side, however, growth of this highly material-intensive industry imposes a much larger and onerous responsibility on the state in calibrating the conflicting interests of the various stakeholders involved in the process. This would call for making informed policy choices, articulation of public policy stances and also for effective implementation and monitoring of the statutes. Above all, the government has to fulfil the role of an alert and responsive overseeing agency and as an arbiter ensuring fair play for all interested parties. The huge requirement of land – for creation of additional steel capacity, supporting infrastructure and expansion of mines – would involve reconciliation of the needs of the industry, the people and of the environment. The state has to be mindful of the social costs and the offsetting social benefits in a dynamic sense keeping in view inter-generational equity considerations. Resolution of such competing needs of different interest groups, between the present and the future, between growth and equity - would all need extreme circumspection and calls for governance with social responsibility in an evenhanded manner. The state would do so keeping in view the long term interest of the people of India.   As of now, the fast-paced growth of the Indian steel industry in the last few years has already put the existing administrative and resource allocation systems under considerable strain. Two such areas that need immediate attention relate to environmental degradation and conservation of primary material and natural resources. It has been reported that a rapidly growing steel industry has given rise to unscientific mining of iron ore, generation of huge quantities of iron ore fines as by products and also unacceptably high levels of CO2 emissions in coal and coke based processes.  If that is so, then the industry needs to introspect and curb such practices and on the other hand, the state needs to activate its regulatory apparatus urgently. Similarly, steel production at the envisaged scale exceeding 100 million tonnes by 2019-2020 would imply a huge draft on the water and mineral resources of the country.     On the whole, however, as far as environmental consciousness is concerned already there are some fine examples of high-level environmental performance in the steel sector. I congratulate the industry for this. The state on its part would do its best to hold hands of the industry and provide necessary support in adopting technologies that utilise wastes and bye products at all process stages and minimise damage to the environment. Use of iron ore fines and other low grade indigenous raw materials  in iron and steel-making is one such emerging area that the government seeks to encourage. It is heartening to note that some of the world leaders in steel have come forward with projects based on alternative process technologies e.g., the FINEX technology of the proposed POSCO plant and the most recent proposal of Kobe Steel Plant using IT mk3 process. With enhanced awareness of corporate social responsibility and a conducive policy environment, we would together build a vibrant steel industry policy and gear it towards attainment of greater efficiency and greater economic benefit.    K A Singh Deo                            Joint Secretary                         Ministry of Steel                            & Chairman, JPC