Steel industry looks ahead

Braja Kishore Tripathy

16-August-2002

     India has a long heritage of iron and steel making. The journey started in ancient times and through the ages this evolved and matured into a vibrant and modern industry at par with the best in the world. The iron and steel industry in India started nearly 100 years ago in Jamshedpur. The Tata Iron and Steel Company (Tisco), started under the aegis of the pioneering Indian entrepreneur Sir Jamshedji Tata had been the icon of the nationalistic pride during the colonial period.

    The steel sector was one of the primary vehicles of economic development in independent India. India is endowed with essential raw materials such as iron ore and coal. The industry has widespread forward and backward linkages with the rest of the economy. The founding fathers of India's Five Year Plans treated this as a priority sector and the industry rose to commanding heights of the economy through large-scale capacity creation in the public sector. Since then it has passed through various phases of changing domestic and external policy environment. The industry as a whole has responded to the emerging compulsions of the changing times. It has survived well with its impressive array of achievements.

    In the initial years of economic planning the State stepped in as a regulator and a guide to reconcile the interests of the producers and consumers of this vital economic input. It also protected the industry from the vagaries of the international market. The change came in the last decade of the 20th century with the liberalisation of the Indian iron and steel industry. The environment of globalization and competitive market orientation combined well with the formidable legacy of a rich experience in the art and craft of steel making acquired over four decades of controlled growth. The industry responded magnificently to the opportunities provided by the new policy regime. The private sector led the resurgence from the front.

    The decade following the deregulation of the Indian steel sector saw the largest additions to capacity. The new entrepreneurs also showed extreme pragmatism and foresight in the selection of technology. As a result, the Indian steel industry today can boast of some of the latest in the state-of-the art technologies in use globally. The post-deregulation Indian iron and steel industry adopted modern technologies and varied product categories. In these years, the industry both in the public and the private sectors saw impressive gains in efficiency of resource use and productivity. The most remarkable achievement of this decade has been a rapid integration of the Indian steel industry with the global market. The quantum jump in exports from India bears witness to that. Globalization has led to manifold expansion in the marketing opportunities for the Indian producers and India has emerged as a net exporter of steel. Production for export has become an integral part of the profit-maximizing and loss-minimizing business calculations of the Indian corporates. The producers can now source their inputs, both physical and financial, from the least cost source beyond the boundaries of the national economy.

    The performance of the Indian steel industry during the last decade, though spectacular, has not been altogether smooth. The euphoric developments in the first few deregulation years were cut short when deceleration set in from the autumn of 1997. The external global environment worsened progressively under pressure from a series of financial meltdowns in various parts of the world while our domestic economy also stagnated. Prices started falling continuously even as the world steel industry strained under conditions of extreme oversupply and cut-throat competition. The domestic market also dwindled on the back of slow growth in construction and other forms of capital formation/investment. Most worrying was the threat posed by narrow national interests which misused the WTO. Non-tariff barriers imposed on the Indian exporters of steel bear ample witness to this predilection. There has been some respite in the last few months with some firming up of domestic and international prices. Prices have risen as a result of improved demand conditions at home and abroad and also because of some rationalization of capacities across the globe, though on a limited scale.

    The industry now looks ahead with a new resolve and determination. Deregulation endows the producers with the freedom to take their own business decisions, but at the same time, it devolves a great deal of responsibility. These include the responsibility to maintain quality standards to remain cost and price efficient and, above all, to meet the consumers' demand as best as possible. Globalization has its opportunities and dangers. Reaping the benefits of a globalized market calls for utmost vigilance from all the stake-holders - the producers, the consumers and the State. The industry must be able to capitalize on the opportunities and mitigate the dangers of synchronized global downturns. This must be done in association with the consumers and the state machinery.

    At the present juncture, one can say that the industry has successfully made the transition from a controlled to a market-driven economic environment. The future of this industry is grounded in its past and its present. Now, there are signs of revival both in the domestic and international steel market. Steel prices and demand have gone up as a result of increased spending on construction and consumer durables both at home and in South East Asia, Japan, the USA and some parts of the Euro zone. There has been some cut back on capacity world -wide and this has helped in restoring the supply-demand balance to some extent.

    The Indian producers have been alert enough to detect cases of violation of their trading rights within and outside their national boundaries. The industry helped by the official machinery has moved the available international bodies to seek redressal. It is also constantly striving to better its performance in every sector. As a result, the Indian steel industry has grown not only in competence but also in confidence. It looks ahead with a resolve to carry the journey which started 100 years ago towards a pinnacle of greater glory and success.