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CHAIRMAN's DESK

We now have positive news that the Orissa Government will be signing an MoU with the POSCO group on 22nd June 2005 for setting up a $12 billion steel plant in the state. This is the largest single FDI project in India and marks the largest presence by a foreign steel group. This development probably marks the beginning of a massive expansion in steel making capacity in the country. The Orissa Government has already signed MoU’s for setting up about 48 million tonnes of capacity. Even if half of this materialises, we can comfortably expect over 65 million tonnes capacity by the year 2012. All the major steel groups in India including Tata Steel, Jindal and Bhushan industries have programmes of setting up green field plants in Orissa with the expectation that they will be given iron ore mining leases. The Lakshmi Mittal Group has, however, chosen Jharkhand for making their maiden appearance in India. We can only hope that all these capacities will actually come up and not remain paper exercises. The recent fall in steel prices has served to dampen producer sentiment in the country. The moot question is whether this is a temporary correction or whether the fall will continue. All eyes are directed at China where it is expected that a temporary slowdown in growth at the behest of the Chinese Government will once again pick up since a lot of infrastructure development is still expected to take place by 2007. At the same time, the steel industry in our country is worried about the relatively low protection available in the form of 5 per cent import duty. This, they claim is a dampener for further investment and in fact, they expect the Government to intervene if prices continue to fall. It is too early to say whether the prophets of doom are justified in their pessimism. The fundamentals of the economy are still strong with the reform process continuing, albeit at a restrictive pace. The Sensex is at its highest and market sentiment is strong on the back of strong efforts at infrastructure development. The steel industry has expressed concerns over the surge in imports of steel materials, particularly HR coils from the CIS countries. They suggest that on a quarter to quarter basis, the imports into India of HR coils in the first quarter of 2005 is 140 per cent more than the previous quarter and about 125 per cent greater than the same quarter last year. They are concerned that cheap imports will affect the health of the industry. It is for the industry to establish whether the import prices are attracting anti dumping action. This will require data for at least six months before action can be taken. Nevertheless, the Government will assist the industry to remain vigilant about imports taking place in the country and in fact, we are thinking of devising a much better imports surveillance system with the direct assistance of the customs authorities. The present issue is devoted to non-flat products, i.e. long products which are now in great demand since there is an apparent boom in the construction sector. Even though the major players particularly, RINL produces significant quantities of long products, the fact remains that the majority of round products are produced in the secondary steel sector. In fact,  we are now trying to bring about a market transformation in the secondary steel sector through a UNDP/GEF project on ‘energy efficiency improvement in the steel rerolling mills sector.’ We hope that in a few years, the industry will be able to substantially upgrade its technology and improve energy efficiency. Unfortunately, the secondary steel sector has been neglected for quite some time and it is now necessary to focus on the needs of this sector.   (J P Singh) Joint Secretary Ministry of Steel & Chairman, JPC.