The great Indian Steel journey Modest beginnings: prior to Independence (1907-1947) The Indian iron and steel Industry is now almost a century old. At the time of independence in 1947, India already had a small but viable iron and steel capacity of around 1 million tonne per annum, thanks mainly to the patriotic zeal of a few entrepreneurs of outstanding stature such as Sir Jamshedji Tata, Dr Visvesvaraya and Sir R N Mukerjee. The entire capacity of the nascent iron and steel industry was in the private sector. Chronology of the early steel plants in the private sector: Tata Iron and Steel Company, 1907 Mysore Iron and Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd), 1923 Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) 1923 Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron and Steel Co), 1939 Towards planned growth: (1956-1968) The first three five year plans and the prolific growth in capacity under the aegis of the public sector The first push to this industry came during the first three five year plans (1952-1970). Massive injections of investment in public sector coupled with a protected market environment laid the foundations of a viable and competitive indigenous iron and steel industry. Thus came into being the so-called temples of modern India. The journey thereafter The growth of the steel industry went on and the policy parameters guiding it till 1992 were: Capacity Licensing: reservation of large scale integrated capacity (above 1 million tonne) for the public sector Dual Pricing System: price and distribution controls for both public and private sector integrated plants while keeping the secondary sector steel producers out of the ambit of price control Protection to domestic industry: tariff barrier, volume based import control through licensing of imports Balanced regional growth: promoted through a system of equalized railway freight for all steel deliveries irrespective of distance The Indian Iron & Steel Company (IISCO), a subsidiary of SAIL since its nationalisation in 1972, has been producing mainly pig iron for lack of adequate steel making facilities Proposals for modernization of this plant are under consideration Total capacity in the public sector was approximately 11 million tonnes in 1992, just prior to the launch of economic reforms The edifice on which growth took place The institutions created for supporting and implementing the policy of regulated growth: The Office of the Iron and Steel Controller, later renamed Office of the Development Commissioner for Iron and Steel under the aegis of the Ministry of Steel. The Joint Plant Committee (JPC), an autonomous body under the chairmanship of the DCI&S, with representation from the integrated steel plants and the Ministry of Railways in its capacity as a significant consumer of steel. The regulatory framework Administered price for the products of integrated steel plants and its different elements. 1. Normated cost of production plus return to capital 2. Other mandated add-ons to administered price i.e., JPC Cess: a levy of Re 1/tonne of steel produced by the integrated steel plants, later raised to Rs 3/tonne. Levy for SDF: a levy on sales of steel by the integrated steel plants for the creation of a circulating fund for financing developmental work/modernization of integrated plants at soft interest rates, - initiated with Rs 100/- per tonne at the time of its discontinuation in 1994. Levy for Engineering Goods Export Assistance Fund: a levy imposed per tonne of steel sold by the integrated plants to create a fund whereby exporters of engineering goods were to be reimbursed for the difference between the (lower) international price of steel and the (higher) domestic controlled price - discontinued in 1992. Equalized railway freight: an uniform railway freight applicable to all steel producers, irrespective of distance - fixed in a manner to compensate the steel producers for the subsidies given to distant customers. Import Pool Fund: a fund created by mopping up the balance between the lower international procurement prices with higher domestic sales prices for selected categories of steel being imported by the canalizing agencies under import licensing. Price fixation for controlled items (initiated for steel in 1923 through tariff protection) Distribution of steel according to laid out societal principles Deciding on the import/export plans based on domestic demand and planned domestic availability Custodianship for collection and disbursal of the revolving 'Steel Development Fund' (SDF) to support developmental activities and capital expenditure programmes of the integrated steel producers at concessional interest rates and providing rebates to the small scale industrial units through the Small Scale Industrial Corporation (SSIC) Custodianship of the Engineering Goods Export Assistance Fund (EGEAF) for the purpose of providing steel at international prices to exporters of engineering goods Custodianship of the Import Pool Fund Created by mopping up the balance between the lower procurement price of imported HR coil and pig iron and the higher administered domestic sale prices charged by the canalizing agencies Fixation of the equalized railway freight rates in order to supply material at the same price throughout the country - the equalized rates being fixed such that the subsidies given to users in distant locations balance out the extras charged to proximate consumer Come seventies: Enter the secondary sector Emergence of the small-scale secondary steel producers in the private sector to bridge the gap between rising demand and stagnating supply from the existing integrated plants. From the mid-seventies, outlays on capacity creation/modernization in the public sector slowed down significantly due to: The resource crunch faced by the State and the resultant reduction in the plan/budgetary outlay in the public sector steel units. Slower growth in internal resource generation by the public sector plants arising out of structural rigidities and other inefficiencies, which affected not only the steel industry but also macro-economy as a whole. The seventies, therefore, saw the proliferation of ferrous scrap iron/ DRI based small scale electric steel producers (electric arc furnace and induction furnace units), which came up to satisfy the excess demand created by shortage of supply over demand. The semi finished ingots/billets produced in the emergent secondary sector led to the commissioning of a large number of re-rolling units to convert semi finished steel to bars and rods used mainly in the construction industry. The economic liberalization to the present times: The growth of the private sector Deregulation of the steel sector - private sector taking the lead in creation of fresh large scale capacity The private sector entrepreneurs responded magnificently to the deregulation of the iron and steel sector (i.e., decontrol of price, distribution and capacity, withdrawal of import and export restrictions etc.) which formed part of the general programme of economic reforms of the Indian economy, started in 1991. The immediate post reform years toted up some remarkable achievements: The largest ever decadal additions to capacity to the tune of 12 million tonnes, almost all of which has been in the private sector. Unprecedented increase in the consumption of steel  Most importantly a quantum jump in exports as a result of global integration of this industry and the consequent emergence of India as a net exporter of steel A significant rise in the flow of foreign direct investment in this sector Following the deregulation of the iron and steel sector, 21 new projects based on state-of-art technologies have been taken up, increasing the total capacity by about 12 million tonnes. Step-by-Step The Year 2001