India’s steel industry has grown significantly since independence and the country is now the fifth largest steel producer in the world. The ministry is responsible for coordination and formulating plans for the growth of the iron and steel industry, including re-rolling mills, alloy steel, ferro alloy industries and refractories both in the public and private sectors. It formulates policies regarding production, pricing, distribution, import and export and also for the development of input industries like iron ore, manganese ore, chrome ore and refractories.
The mandate of the ministry is to regulate and facilitate both production and consumption of iron and steel, particularly regarding mining allocation policies, taxation and tariff regime and forest clearance. It also coordinates with other ministries and departments for the provision of infrastructure like railways, roads, ports, power and water supply. At the same time, the ministry attempts to facilitate domestic demand and export of steel by developing the retail network of public sector undertakings.
The iron and steel industry, a driving force of the socialist Nehruvian industrialization strategy, has changed to more private sector led industry. The ministry, too, has changed its focus from being a regulation to facilitation of investments since liberalisation of the economy in 1991. This is one of the few ministries, like the petroleum ministry, that have public sector enterprises under their auspices and is also geared to attract more private sector investment.
The ministry has 11 public sector undertakings (PSU) across the country under its administrative control.
India has sizeable iron ore reserves and recognizing that there is significant opportunity for developing the iron and steel industry, the first Five Year Plan of 1952 imposed import restrictions to promote domestic production and a number of steel plants were set up. The momentum was further accelerated during the second Five Year Plan in 1956, in which India adopted a Mahalanobis-Nehruvian style mixed economy to develop the capital goods sector that would provide a strong base for industrialisation of the economy. The steel ministry played a very important role in this strategy.
Despite significant growth in production in the 1970s and 1980s, consumption of iron and steel did not grow as a result of low economic growth during this period. Following a severe balance of payment crisis in the late 1980s, India enacted a comprehensive liberalisation of economic policies including the removal of restrictions on the steel industry and the reduction of tariff rates. Besides, foreign direct investment was encouraged and the sector was put on a “high priority,” which allowed up to 51% foreign direct investment. Steel production increased by 10% in the 1990s following a growth in private sector investment. Since 1992, 100% foreign direct investment has been allowed through the automatic route in the sector. Pricing and distribution has been deregulated and iron ore and steel can be freely exported and imported.
The growth rate continued in the early 2000s and the ministry formulated the National Steel Policy in 2005. The ministry has initiated the drafting of a new steel policy in the context of significant growth in steel production capacity and reduction in imports. The buoyant GDP growth rate has supported steel demand in the country. Consumption growth over the past decade has been around 10%. Foreign investment of $40 billion has been committed to the sector.
Since liberalization, the steel industry only imposes a 5% import duty. Export of raw materials exceeds domestic consumption. The focus of the department is on capacity building through foreign investment and public-private partnership projects and increasing both domestic and foreign consumption.
The National Steel Policy, 2005 projected that steel production would increase in line with GDP and would reach 100 million by 2019-20. But, growth rate in steel has actually exceeded expectations since then.
Post-liberalization, the role of the steel ministry has changed significantly. Although the PSUs under the steel ministry, Rashtriya Ispat Nigam Ltd and Steel Authority of India Ltd (SAIL) still account for a quarter of steel production in the country, the private sector players like Tata Steel, JSW Steel and other smaller private players dominate in the modern electric furnace method steel production. While the public sector players continue to operate large capacity plants, most of the private firms operate smaller capacity plants.
Construction and infrastructure contribute 40% of India’s steel demand, manufacturing, including automobile, contributing the rest of steel consumption. Steel is also an important export item from India, contributing 4% of India’s export revenues. Expansion plans by India’s steel units are expected to soon meet Indian demand. The ministry also expects India to overtake Japan as world’s second largest producer by 2015-16. To protect domestic steel producers, export duties on iron ore have been raised thrice since 2009-10. India’s demand for iron ore is met by high-quality reserves in Chattisgarh, Odisha and Jharkhand in the east and in Karnataka and Goa in the south west. The iron ore manufacturing is highly fragmented and engages many participants. The National Steel Policy, 2005, recognized that the industry needs to be agglomerated by encouraging the formation of consortium of small mines. India’s production of coking coal, the other main intermediate product required in steel manufacturing, is small and is dependent on imports. The National Steel Policy, 2005 encouraged the growth of non-coking coal methods of steel production, like electric arc furnaces.
A new steel policy is expected in 2012. The policy will focus increasing India’s steel manufacturing capacity. Capacity creation has lagged because of the delays in construction of large plants planned by POSCO and Arcellor Mittal. The ministry plans to increase total capacity to 145 MTPA by 2015. The draft policy document addresses issues like the economic, financial, technical and environmental background, raw material and infrastructure facilitation.
Attached Bodies, Autonomous Bodies and Public Sector Undertakings:
Attached/ Autonomous Bodies
Joint Plant Committee (JPC)
The JPC collects and maintains data on the Indian iron and steel industry. The committee was formed in 1962 but was reconstituted in 1992 after liberalisation. The JPC database is quality certified under ISO 9001:2000. It maintains database on capacity, production and stocks of all producers in the public and private sectors, domestic market prices, CIF, FOB and landed cost, export and import of iron and steel, production, import and reserves of select raw materials, dispatch of steel and consumption of iron and steel. The JPC is headquartered in Kolkata and has regional offices in New Delhi, Mumbai, Kolkata and Chennai.
National Institute of Secondary Steel Technology (NISST)
It provides long term and short term courses on secondary steel technology, extends consultancy to the industry, conducts research and development.
Biju Patnaik National Steel Institute (BPNSI)
Established in 2002 in Odisha, it provides education and training, research and development and consultancy.
Public Sector Undertakings
Steel Authority of India (SAIL)
SAIL was established as Hindustan Steel (Private) Ltd in 1954 to oversee the Rourkela Steel plant in Madhya Pradesh. By 1972, Hindustan Steel had also built integrated steel plants in Bokaro (Jharkhand) and Burnpur (West Bengal). It also built the Alloy Steel Plant in Durgapur (West Bengal), Visvevaraya Iron and Steel Plant (Karnataka) and the Salem Steel Plant (Andhra Pradesh), all of which are specialized steel plants. In 1972, after the transfer of the Bhilai (in Madhya Pradesh) and Durgapur (West Bengal) steel plants the Ministry of Steel to its holding company, Hindustan Steel was renamed the Steel Authority of India (SAIL). On June 10 2011, SAIL absorbed a subsiduary plant called the Maharashtra Elektrosmelt Limited in Chandrapur (Maharashtra) and renamed it the Chandrapur Ferro Alloy Plant (CFP)
Presently, it is the leading steel manufacturing company in the country and is given the “Maharatna,” or a “jewel of the jewels” status among central public sector undertakings. The company has joint ventures with NTPC Ltd, the largest thermal power generator in the country, and other power companies. It also has a JV with Coal India Ltd, NTPC and other PSUs in International Coal Ventures Ltd for global acquisition of coal assets. SAIL is a listed company with the government holding 86% of equity shares.
Set up in 1982, the company operates the Vishakhapatnam Steel Plant in Andhra Pradesh. A Navratna (one of the nine jewels among the PSUs) company, it produces billets, wire rods, rounds, squares, flats, channels, angles and universal beams. A 2012 report by the New Delhi-based NGO the Centre for Science and the Environment named Vishakhapatnam as one of the three greenest steel plants in India.
National Mineral Development Corporation (NMDC Ltd)
The largest producer of iron ore in the country, the company has mines in Bailadila in the Bastar district of Chhatisgarh and Donimalai in Karnataka. It also has a diamond mine at Panna in Madhya Pradesh and a sponge iron plant at Paloncha in Andhra Pradesh. It is also diversifying its steel making by building a 3MTPA integrated steel plant at Jagdalpur in Chhatisgarh and two pellet plants, one in Karnataka and one in Chhatisgarh.
Formerly known as the Kudremukh Iron Ore Co, KIOCL was established in 1987 as a 100% export-oriented iron ore mine in Kudremukh in Andhra Pradesh. It has also set up a pellet plant for exports and a pig iron plant for the domestic market in Mangalore. The iron ore mining business was stopped by court order in 2006.
Set up in 1959, it is an engineering consultancy and contracting organization. It undertakes consultancy and turnkey projects in metals, power, oil and gas and infrastructure sectors.
Formerly Manganese Ore (India) Limited, MOIL was established in Nagpur in 1962. The company mines manganese ore and produces manganese dioxide and ferro manganese.
Established in 1974, MSTC was formerly a SAIL subsiduary. The company, which split from SAIL in 1982, disposes of ferrous and non-ferrous scrap from SAIL and RISNL plants.
Hindustan Steel Works Construction Ltd
Established in 1964, the company provides construction services in steel plants, power plants, coal, oil and gas and also in the construction of industrial and township complexes.
This is a wholly owned subsidiary of MSTC. It recovers and processes scrap from slag and refuse dumps from iron and steel plants and returns the processed scrap to steel plants.
These seven companies were acquired by the government in 1980. Four of these, which produce iron ore, manganese ore, sponge iron, limestone and dolomite, are under operation while the other three are in the process of liquidation.
This is a special purpose vehicle formed by SAIL, RINL, CIL, NMDC and NTPC for the acquisition of metallurgical and thermal coal assets abroad.
The estimated budget for 2012-13 of about $40 billion has been published for projects sanctioned for the various PSUs. Among the bigger projects with outlays of over $1mn that the ministry has sanctioned funds for, most fund outlays have been for expansion of production capacity of various steel plants.
Under SAIL, the largest budget has been laid out for expansion of Bhilai steel plant ($812mn), Rourkela steel plant ($582mn), Bokaro steel plant (280mn) and the Durgapur steel plant ($200mn). Funds have also been sanctioned for expansion of the Indian Iron and Steel CO (IISCO) plant in Burnpur ($463mn) and the expansion of the liquid steel plant of RISNL ($1.58mn). Funds have also been allocated for diversification of NMDC into a steel plant at Nagamar ($6.38mn). Besides these, funds have been sanctioned for on-going repair works, research and development, energy efficiency initiatives and so on.
Massive Delays Opening the POSCO Steel plant in Odisha
In 2005, the ministry allowed South Korean company POSCO, the second-largest steel manufacturer in the world, to set up the largest steel plant (12million tons per annum) in the world in Odisha on India’s east coast. Although the state government had signed the agreement with POSCO, the Steel Ministry also supported it. The project was to be built near the port of Paradip.
One challenge has been land acquisition. Tribals in the area are violently resisting the project. The tribal groups say the project would displace them and destroy their livelihood. There has also been some rights violations in supressing the agitation around the land acquisition, according to Amnesty. Narayan Reddy, an Odisha Communist Party leader was arrested on what AI characterized as a bogus murder charge. He was acquitted in May (There has been a larger pattern of these sort of cases in India’s mineral-rich Naxal belt.) On December 23, 2011 there was a clash between protesters and workers building a road leading to the plant. Twenty-five people were injured and one person was killed. But Amnesty maintains that Reddy had direct involvement in the violence. The state government has already acquired 2000 acres of land for the project but has only handed over 500 acres to the company.
The other challenges in getting the plant up and running are related to India’s problems with red tape and bureaucratic hurdles. As the project faces seemingly endless delays, the agreement lapsed in 2010 and the ministry slapped additional conditions before signing the agreement between the central and state governments and POSCO. The company now plans to begin construction of a 8 MTPA plant and later expand it to the original proposal of 12 MTPA. A controversial provision in the previous agreement allowed POSCO to export iron ore from its captive mines in Odisha and import a similar quantity. The clause has been scrapped and instead the company will be allowed to swap up to 30% of the iron ore within the country through the Odisha Mining Corporation.
The environment ministry also gave a conditional go-ahead to the project but in 2012, a two-person tribunal set up the government dismissed the environment license for the project, shaking foreign investors’ confidence in the country. The environment ministry had also put additional conditions for building the steel plant and the port near it. It is likely that the scrapping of the export clause in the new agreement will pave the way for a renewed environment license as well.
The delays in POSCO’s opening have further reinforced the perception that India is a tough place to do business.
Anti-Steel Plant Leader Released on Bail! (Amnesty International)
Tribunal Suspends Approval of the Steel Project in India (by Vikas Bajaj, New York Times)
India suspends Posco steel plant environment licence (BBC News India)
POSCO ready to sacrifice export clause, new deal soon (by Press Trust India, Business Standard)
Land Acquisition
Most of the large steel plants planned in the country are being delayed because of hurdles associated with land acquisition. POSCO in Odisha has so far got only 500 acres of land for its prpsed 8MTPA (originally 12MTPA) plant in Odisha’s Jagatsinghpur district. Arcellor Mittal and Tata Steel are struggling to get land for the propsed steel plants in Chattisgarh and Jharkhand respectively. The conversation on land acquisition is politically charged. Most of these areas are tribal dominated and the people are dependent on the forest for their livelihoods. The displacement and rehabilitation issues pose hurdles for land acquisition.
Pro-Land Acquisition
Those on the pro-acquisition side are wealthy industrialists who say that acquiring and developing resource rich areas, which also happen to often be tribal areas, is key to fueling India’s growth as a developing nation. Without the mineral resources of these areas they argue, India can never reach its potential. Arcelor Mittal head Lakshmi Mittal got into a public row with steel minister Beni Prasad Verma for saying that land acquisition and getting a plant up and running in India can take up to 10 years. Verma accused Mittal of maligning India. As a democracy, India can’t move projects through regulatory hurdles as quickly as autocratic regimes.
Indian Steelmakers Breach Green Rules: Report (by Prasenjit Bhattacharya, The Wall Street Journal)
Anti-Land Acquisition
At issue during the acquisition of land in the POSCO case was the fact that the land was non-deeded land that many members of the local community farmed communally. How would be possible to fairly compensate the community living communally and farming communally for millennia? Another argument frequently raised by those opposed to land acquisition is that India’s steel plants have a terrible environmental record. They have not even been able to comply with India’s already lax environmental laws.
Bardhan joins Posco Protest (by Manoj Kar, The Telegraph)
Measured Land Aquistion
Former Minister of the environment Jairam Ramesh, who earned the scorn of many industrialists, has suggested a middle way. It was Ramesh who first blocked the POSCO steel plant in January 2011 before making them agree to many of his demands, including halving the size of the plant. “I am not an environmentalist,” he told Newsweek. “Environmentalism is the environment at all costs.” Instead, Ramesh advocates finding a compromise that both India’s business titans and disempowered tribal groups can agree on.
Why India Might Save The Planet (by Jeremy Kahn, Newsweek)
Should Mining Be Banned in Coastal Areas?
The Supreme Court in 2006 banned mining in the Western Ghats and ordered the state-owned Kudremukh to shut down mining of magnetite, a low grade iron ore with magnetic property used in steel manufacturing. Illegal mining in Karnataka has recently been stopped and there is an increasing pressure to stop mining in environmentally sensitive areas. The private mines in Karnataka have gone through an extensive rehabilitation and reclamation plans that have been approved before being allowed to begin mining again.
Steel ministry for key changes in mining Bill (by Sudheer Pal Singh, Business Standard)
New mining bill: Steel, mining ministries differ on benefits of captive allocation (by Meera Mohanty, Economic Times)
Pro-Coastal Mining
A task force set up by the Steel Ministry has proposed underground mining of iron ore in the coastal areas. The ministry argues that the iron ore deposits in the country are fast depleting and underground mining could solve the problem of ore shortages. The environmental issues and bans on mining in the coastal areas have led to severe shortages of ores for the user industries.
Task Force suggests underground mining in western ghats (by Meera Mohanty, Economic Times)
Private iron ore mines in Karnataka to open by month end (by Anshul Dhamija, Times of India)
Anti-Coastal Mining
According to the July 2012 Human Rights Watch report “Mining Industry Out of Control,” even the so-called legal mining in Karnataka and Goa “illustrate broader patterns of failed regulation, alleged corruption and community harm. It shows how even mines operating with the approval of government regulators are able to violate the law with complete impunity.”
The report continues: “Some communities in Goa resort to making use of surface water for at least part of the year because their groundwater supplies have been damaged or destroyed by nearby mining operations.”
The Despicable illegal mining Horror of India (by Vicky Nanjappa, Rediff News)
Good? Bad? Ugly? Why they put four women in the jug (by Hartman de Souza, SaveGoa.org)
Allow Competitive bidding for Mineral Resources
Background
The proposed mining bill wants auctioning of natural resources and scrap reservation of public sector undertakings and prior approval of the central government for giving mining rights. The bill has already been approved by a group of ministers and has been placed at Parliament. Competitive bidding is proposed to attract private investment in the mining sector. The mining ministry also feels that captive allocation of mines to end users like steel plants often lead to suboptimal use of capacities. The steel ministry has raised objections to the auctioning process proposed in the draft mining bill. The ministry, which oversees a number of PSUs that have iron ore and coal mining rights, is worried that the mines will be auctioned through competitive bidding after the leases expire.
Pro-Competitive Bidding
Mining industries and ministry wants competitive bidding in natural resources so that there is more investment in the sector. The Comptroller of Auditor General (CAG) has indicted the coal ministry for allocating coalmines to power and steel companies without competitive bidding. Out of the 54 captive coalmines allocated between 2006 and 2009, only one mine has begun production. The main Opposition Party, Bharatiya Janata Party, has demanded that the mining policy is changed immediately so that mines are allocated only through competitive bidding.
New Mining Bill: Steel, Mining Ministries Differ on Benefits of Captive Allocation (Economic Times)
Anti-Competitive Bidding
User industries like steel and power are concerned that they will not be able to bid at competitive rates if mines are auctioned. Coal India is also against competitive bidding as it is worried that foreign coal companies will bid at lower prices.
Competitive Bidding Could Have Saved Rs 1.86lakh cr: CAG (Business Standard)
Invest in Infrastructure to Drive Steel Demand
One of Indias’s oft-stated goals is to increase its lackluster infrastructure. The steel industry is under the pressure as a result of the global recession. A double dip in the European economy has affected adversely the European operations of the leading private companies in the sector, like Tata Steel, the world’s seventh largest steel producer. The Indian steel demand is also slowing down with the lower GDP figures. The 12th Plan thrust on infrastructure, with plans to build ports, airports, roads, railways, power and coal will boost the demand for steel as the infrastructure sector has an elasticity of 0.8% with consumption of steel. The ministry should frame the new policy in such a manner that would boost consumption demand for steel.
Apart from falling demand, the other major problem with the steel industry is the high cost of fuel, with inadequate domestic supplies of coking coal. A fall in coking coal price, with lower global demand, is fuelling Indian steel producers step up imports. Although some private steel manufacturers have acquired coal mines abroad, others are dependent on domestic coal. The steel ministry should ensure that the steel plants begin operations in the captive mines urgently.
Rise in infrastructure spending to boost demand: SAIL chairman (NDTV)
Infrastructure spend to boost steel demand, move to preserve resource welcomed (by FE Bureau, Financial Express)
Speed up Approval Process
The long delays in setting up big-ticket investments in steel plants have not only affected sentiments of foreign investment but have also resulted in supply constraints. The ministry should make attempts to attract investment in other less sensitive areas. For example, while POSCO struggles with starting construction of the large but delayed plant in Odisha, it has begun to build a smaller ht galvanized steel plant in Maharashtra to cater to the demand of the demands of the automobile and consumer demand sectors. Arcellor Mittal has also announced building a smaller plant in non-tribal areas of Jharkhand in lieu of the plant in Chattisgarh. L N Mittal, owner of Arcellor Mittal, has been vocal in expressing his anguish over the delays with land acquisition in Chhatisgarh. The steel ministry should make attempts at allaying such fears of foreign investors.
Fumbling Ministry to Blame for Posco Project Mess (Mail Today)
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Ministry of Steel
India’s steel industry has grown significantly since independence and the country is now the fifth largest steel producer in the world. The ministry is responsible for coordination and formulating plans for the growth of the iron and steel industry, including re-rolling mills, alloy steel, ferro alloy industries and refractories both in the public and private sectors. It formulates policies regarding production, pricing, distribution, import and export and also for the development of input industries like iron ore, manganese ore, chrome ore and refractories.
The mandate of the ministry is to regulate and facilitate both production and consumption of iron and steel, particularly regarding mining allocation policies, taxation and tariff regime and forest clearance. It also coordinates with other ministries and departments for the provision of infrastructure like railways, roads, ports, power and water supply. At the same time, the ministry attempts to facilitate domestic demand and export of steel by developing the retail network of public sector undertakings.
The iron and steel industry, a driving force of the socialist Nehruvian industrialization strategy, has changed to more private sector led industry. The ministry, too, has changed its focus from being a regulation to facilitation of investments since liberalisation of the economy in 1991. This is one of the few ministries, like the petroleum ministry, that have public sector enterprises under their auspices and is also geared to attract more private sector investment.
The ministry has 11 public sector undertakings (PSU) across the country under its administrative control.
India has sizeable iron ore reserves and recognizing that there is significant opportunity for developing the iron and steel industry, the first Five Year Plan of 1952 imposed import restrictions to promote domestic production and a number of steel plants were set up. The momentum was further accelerated during the second Five Year Plan in 1956, in which India adopted a Mahalanobis-Nehruvian style mixed economy to develop the capital goods sector that would provide a strong base for industrialisation of the economy. The steel ministry played a very important role in this strategy.
Despite significant growth in production in the 1970s and 1980s, consumption of iron and steel did not grow as a result of low economic growth during this period. Following a severe balance of payment crisis in the late 1980s, India enacted a comprehensive liberalisation of economic policies including the removal of restrictions on the steel industry and the reduction of tariff rates. Besides, foreign direct investment was encouraged and the sector was put on a “high priority,” which allowed up to 51% foreign direct investment. Steel production increased by 10% in the 1990s following a growth in private sector investment. Since 1992, 100% foreign direct investment has been allowed through the automatic route in the sector. Pricing and distribution has been deregulated and iron ore and steel can be freely exported and imported.
The growth rate continued in the early 2000s and the ministry formulated the National Steel Policy in 2005. The ministry has initiated the drafting of a new steel policy in the context of significant growth in steel production capacity and reduction in imports. The buoyant GDP growth rate has supported steel demand in the country. Consumption growth over the past decade has been around 10%. Foreign investment of $40 billion has been committed to the sector.
Since liberalization, the steel industry only imposes a 5% import duty. Export of raw materials exceeds domestic consumption. The focus of the department is on capacity building through foreign investment and public-private partnership projects and increasing both domestic and foreign consumption.
The National Steel Policy, 2005 projected that steel production would increase in line with GDP and would reach 100 million by 2019-20. But, growth rate in steel has actually exceeded expectations since then.
Post-liberalization, the role of the steel ministry has changed significantly. Although the PSUs under the steel ministry, Rashtriya Ispat Nigam Ltd and Steel Authority of India Ltd (SAIL) still account for a quarter of steel production in the country, the private sector players like Tata Steel, JSW Steel and other smaller private players dominate in the modern electric furnace method steel production. While the public sector players continue to operate large capacity plants, most of the private firms operate smaller capacity plants.
Construction and infrastructure contribute 40% of India’s steel demand, manufacturing, including automobile, contributing the rest of steel consumption. Steel is also an important export item from India, contributing 4% of India’s export revenues. Expansion plans by India’s steel units are expected to soon meet Indian demand. The ministry also expects India to overtake Japan as world’s second largest producer by 2015-16. To protect domestic steel producers, export duties on iron ore have been raised thrice since 2009-10. India’s demand for iron ore is met by high-quality reserves in Chattisgarh, Odisha and Jharkhand in the east and in Karnataka and Goa in the south west. The iron ore manufacturing is highly fragmented and engages many participants. The National Steel Policy, 2005, recognized that the industry needs to be agglomerated by encouraging the formation of consortium of small mines. India’s production of coking coal, the other main intermediate product required in steel manufacturing, is small and is dependent on imports. The National Steel Policy, 2005 encouraged the growth of non-coking coal methods of steel production, like electric arc furnaces.
A new steel policy is expected in 2012. The policy will focus increasing India’s steel manufacturing capacity. Capacity creation has lagged because of the delays in construction of large plants planned by POSCO and Arcellor Mittal. The ministry plans to increase total capacity to 145 MTPA by 2015. The draft policy document addresses issues like the economic, financial, technical and environmental background, raw material and infrastructure facilitation.
Attached Bodies, Autonomous Bodies and Public Sector Undertakings:
Attached/ Autonomous Bodies
Joint Plant Committee (JPC)
The JPC collects and maintains data on the Indian iron and steel industry. The committee was formed in 1962 but was reconstituted in 1992 after liberalisation. The JPC database is quality certified under ISO 9001:2000. It maintains database on capacity, production and stocks of all producers in the public and private sectors, domestic market prices, CIF, FOB and landed cost, export and import of iron and steel, production, import and reserves of select raw materials, dispatch of steel and consumption of iron and steel. The JPC is headquartered in Kolkata and has regional offices in New Delhi, Mumbai, Kolkata and Chennai.
National Institute of Secondary Steel Technology (NISST)
It provides long term and short term courses on secondary steel technology, extends consultancy to the industry, conducts research and development.
Biju Patnaik National Steel Institute (BPNSI)
Established in 2002 in Odisha, it provides education and training, research and development and consultancy.
Public Sector Undertakings
Steel Authority of India (SAIL)
SAIL was established as Hindustan Steel (Private) Ltd in 1954 to oversee the Rourkela Steel plant in Madhya Pradesh. By 1972, Hindustan Steel had also built integrated steel plants in Bokaro (Jharkhand) and Burnpur (West Bengal). It also built the Alloy Steel Plant in Durgapur (West Bengal), Visvevaraya Iron and Steel Plant (Karnataka) and the Salem Steel Plant (Andhra Pradesh), all of which are specialized steel plants. In 1972, after the transfer of the Bhilai (in Madhya Pradesh) and Durgapur (West Bengal) steel plants the Ministry of Steel to its holding company, Hindustan Steel was renamed the Steel Authority of India (SAIL). On June 10 2011, SAIL absorbed a subsiduary plant called the Maharashtra Elektrosmelt Limited in Chandrapur (Maharashtra) and renamed it the Chandrapur Ferro Alloy Plant (CFP)
Presently, it is the leading steel manufacturing company in the country and is given the “Maharatna,” or a “jewel of the jewels” status among central public sector undertakings. The company has joint ventures with NTPC Ltd, the largest thermal power generator in the country, and other power companies. It also has a JV with Coal India Ltd, NTPC and other PSUs in International Coal Ventures Ltd for global acquisition of coal assets. SAIL is a listed company with the government holding 86% of equity shares.
Set up in 1982, the company operates the Vishakhapatnam Steel Plant in Andhra Pradesh. A Navratna (one of the nine jewels among the PSUs) company, it produces billets, wire rods, rounds, squares, flats, channels, angles and universal beams. A 2012 report by the New Delhi-based NGO the Centre for Science and the Environment named Vishakhapatnam as one of the three greenest steel plants in India.
National Mineral Development Corporation (NMDC Ltd)
The largest producer of iron ore in the country, the company has mines in Bailadila in the Bastar district of Chhatisgarh and Donimalai in Karnataka. It also has a diamond mine at Panna in Madhya Pradesh and a sponge iron plant at Paloncha in Andhra Pradesh. It is also diversifying its steel making by building a 3MTPA integrated steel plant at Jagdalpur in Chhatisgarh and two pellet plants, one in Karnataka and one in Chhatisgarh.
Formerly known as the Kudremukh Iron Ore Co, KIOCL was established in 1987 as a 100% export-oriented iron ore mine in Kudremukh in Andhra Pradesh. It has also set up a pellet plant for exports and a pig iron plant for the domestic market in Mangalore. The iron ore mining business was stopped by court order in 2006.
Set up in 1959, it is an engineering consultancy and contracting organization. It undertakes consultancy and turnkey projects in metals, power, oil and gas and infrastructure sectors.
Formerly Manganese Ore (India) Limited, MOIL was established in Nagpur in 1962. The company mines manganese ore and produces manganese dioxide and ferro manganese.
Established in 1974, MSTC was formerly a SAIL subsiduary. The company, which split from SAIL in 1982, disposes of ferrous and non-ferrous scrap from SAIL and RISNL plants.
Hindustan Steel Works Construction Ltd
Established in 1964, the company provides construction services in steel plants, power plants, coal, oil and gas and also in the construction of industrial and township complexes.
This is a wholly owned subsidiary of MSTC. It recovers and processes scrap from slag and refuse dumps from iron and steel plants and returns the processed scrap to steel plants.
These seven companies were acquired by the government in 1980. Four of these, which produce iron ore, manganese ore, sponge iron, limestone and dolomite, are under operation while the other three are in the process of liquidation.
This is a special purpose vehicle formed by SAIL, RINL, CIL, NMDC and NTPC for the acquisition of metallurgical and thermal coal assets abroad.
The estimated budget for 2012-13 of about $40 billion has been published for projects sanctioned for the various PSUs. Among the bigger projects with outlays of over $1mn that the ministry has sanctioned funds for, most fund outlays have been for expansion of production capacity of various steel plants.
Under SAIL, the largest budget has been laid out for expansion of Bhilai steel plant ($812mn), Rourkela steel plant ($582mn), Bokaro steel plant (280mn) and the Durgapur steel plant ($200mn). Funds have also been sanctioned for expansion of the Indian Iron and Steel CO (IISCO) plant in Burnpur ($463mn) and the expansion of the liquid steel plant of RISNL ($1.58mn). Funds have also been allocated for diversification of NMDC into a steel plant at Nagamar ($6.38mn). Besides these, funds have been sanctioned for on-going repair works, research and development, energy efficiency initiatives and so on.
Massive Delays Opening the POSCO Steel plant in Odisha
In 2005, the ministry allowed South Korean company POSCO, the second-largest steel manufacturer in the world, to set up the largest steel plant (12million tons per annum) in the world in Odisha on India’s east coast. Although the state government had signed the agreement with POSCO, the Steel Ministry also supported it. The project was to be built near the port of Paradip.
One challenge has been land acquisition. Tribals in the area are violently resisting the project. The tribal groups say the project would displace them and destroy their livelihood. There has also been some rights violations in supressing the agitation around the land acquisition, according to Amnesty. Narayan Reddy, an Odisha Communist Party leader was arrested on what AI characterized as a bogus murder charge. He was acquitted in May (There has been a larger pattern of these sort of cases in India’s mineral-rich Naxal belt.) On December 23, 2011 there was a clash between protesters and workers building a road leading to the plant. Twenty-five people were injured and one person was killed. But Amnesty maintains that Reddy had direct involvement in the violence. The state government has already acquired 2000 acres of land for the project but has only handed over 500 acres to the company.
The other challenges in getting the plant up and running are related to India’s problems with red tape and bureaucratic hurdles. As the project faces seemingly endless delays, the agreement lapsed in 2010 and the ministry slapped additional conditions before signing the agreement between the central and state governments and POSCO. The company now plans to begin construction of a 8 MTPA plant and later expand it to the original proposal of 12 MTPA. A controversial provision in the previous agreement allowed POSCO to export iron ore from its captive mines in Odisha and import a similar quantity. The clause has been scrapped and instead the company will be allowed to swap up to 30% of the iron ore within the country through the Odisha Mining Corporation.
The environment ministry also gave a conditional go-ahead to the project but in 2012, a two-person tribunal set up the government dismissed the environment license for the project, shaking foreign investors’ confidence in the country. The environment ministry had also put additional conditions for building the steel plant and the port near it. It is likely that the scrapping of the export clause in the new agreement will pave the way for a renewed environment license as well.
The delays in POSCO’s opening have further reinforced the perception that India is a tough place to do business.
Anti-Steel Plant Leader Released on Bail! (Amnesty International)
Tribunal Suspends Approval of the Steel Project in India (by Vikas Bajaj, New York Times)
India suspends Posco steel plant environment licence (BBC News India)
POSCO ready to sacrifice export clause, new deal soon (by Press Trust India, Business Standard)
Land Acquisition
Most of the large steel plants planned in the country are being delayed because of hurdles associated with land acquisition. POSCO in Odisha has so far got only 500 acres of land for its prpsed 8MTPA (originally 12MTPA) plant in Odisha’s Jagatsinghpur district. Arcellor Mittal and Tata Steel are struggling to get land for the propsed steel plants in Chattisgarh and Jharkhand respectively. The conversation on land acquisition is politically charged. Most of these areas are tribal dominated and the people are dependent on the forest for their livelihoods. The displacement and rehabilitation issues pose hurdles for land acquisition.
Pro-Land Acquisition
Those on the pro-acquisition side are wealthy industrialists who say that acquiring and developing resource rich areas, which also happen to often be tribal areas, is key to fueling India’s growth as a developing nation. Without the mineral resources of these areas they argue, India can never reach its potential. Arcelor Mittal head Lakshmi Mittal got into a public row with steel minister Beni Prasad Verma for saying that land acquisition and getting a plant up and running in India can take up to 10 years. Verma accused Mittal of maligning India. As a democracy, India can’t move projects through regulatory hurdles as quickly as autocratic regimes.
Indian Steelmakers Breach Green Rules: Report (by Prasenjit Bhattacharya, The Wall Street Journal)
Anti-Land Acquisition
At issue during the acquisition of land in the POSCO case was the fact that the land was non-deeded land that many members of the local community farmed communally. How would be possible to fairly compensate the community living communally and farming communally for millennia? Another argument frequently raised by those opposed to land acquisition is that India’s steel plants have a terrible environmental record. They have not even been able to comply with India’s already lax environmental laws.
Bardhan joins Posco Protest (by Manoj Kar, The Telegraph)
Measured Land Aquistion
Former Minister of the environment Jairam Ramesh, who earned the scorn of many industrialists, has suggested a middle way. It was Ramesh who first blocked the POSCO steel plant in January 2011 before making them agree to many of his demands, including halving the size of the plant. “I am not an environmentalist,” he told Newsweek. “Environmentalism is the environment at all costs.” Instead, Ramesh advocates finding a compromise that both India’s business titans and disempowered tribal groups can agree on.
Why India Might Save The Planet (by Jeremy Kahn, Newsweek)
Should Mining Be Banned in Coastal Areas?
The Supreme Court in 2006 banned mining in the Western Ghats and ordered the state-owned Kudremukh to shut down mining of magnetite, a low grade iron ore with magnetic property used in steel manufacturing. Illegal mining in Karnataka has recently been stopped and there is an increasing pressure to stop mining in environmentally sensitive areas. The private mines in Karnataka have gone through an extensive rehabilitation and reclamation plans that have been approved before being allowed to begin mining again.
Steel ministry for key changes in mining Bill (by Sudheer Pal Singh, Business Standard)
New mining bill: Steel, mining ministries differ on benefits of captive allocation (by Meera Mohanty, Economic Times)
Pro-Coastal Mining
A task force set up by the Steel Ministry has proposed underground mining of iron ore in the coastal areas. The ministry argues that the iron ore deposits in the country are fast depleting and underground mining could solve the problem of ore shortages. The environmental issues and bans on mining in the coastal areas have led to severe shortages of ores for the user industries.
Task Force suggests underground mining in western ghats (by Meera Mohanty, Economic Times)
Private iron ore mines in Karnataka to open by month end (by Anshul Dhamija, Times of India)
Anti-Coastal Mining
According to the July 2012 Human Rights Watch report “Mining Industry Out of Control,” even the so-called legal mining in Karnataka and Goa “illustrate broader patterns of failed regulation, alleged corruption and community harm. It shows how even mines operating with the approval of government regulators are able to violate the law with complete impunity.”
The report continues: “Some communities in Goa resort to making use of surface water for at least part of the year because their groundwater supplies have been damaged or destroyed by nearby mining operations.”
The Despicable illegal mining Horror of India (by Vicky Nanjappa, Rediff News)
Good? Bad? Ugly? Why they put four women in the jug (by Hartman de Souza, SaveGoa.org)
Allow Competitive bidding for Mineral Resources
Background
The proposed mining bill wants auctioning of natural resources and scrap reservation of public sector undertakings and prior approval of the central government for giving mining rights. The bill has already been approved by a group of ministers and has been placed at Parliament. Competitive bidding is proposed to attract private investment in the mining sector. The mining ministry also feels that captive allocation of mines to end users like steel plants often lead to suboptimal use of capacities. The steel ministry has raised objections to the auctioning process proposed in the draft mining bill. The ministry, which oversees a number of PSUs that have iron ore and coal mining rights, is worried that the mines will be auctioned through competitive bidding after the leases expire.
Pro-Competitive Bidding
Mining industries and ministry wants competitive bidding in natural resources so that there is more investment in the sector. The Comptroller of Auditor General (CAG) has indicted the coal ministry for allocating coalmines to power and steel companies without competitive bidding. Out of the 54 captive coalmines allocated between 2006 and 2009, only one mine has begun production. The main Opposition Party, Bharatiya Janata Party, has demanded that the mining policy is changed immediately so that mines are allocated only through competitive bidding.
New Mining Bill: Steel, Mining Ministries Differ on Benefits of Captive Allocation (Economic Times)
Anti-Competitive Bidding
User industries like steel and power are concerned that they will not be able to bid at competitive rates if mines are auctioned. Coal India is also against competitive bidding as it is worried that foreign coal companies will bid at lower prices.
Competitive Bidding Could Have Saved Rs 1.86lakh cr: CAG (Business Standard)
Invest in Infrastructure to Drive Steel Demand
One of Indias’s oft-stated goals is to increase its lackluster infrastructure. The steel industry is under the pressure as a result of the global recession. A double dip in the European economy has affected adversely the European operations of the leading private companies in the sector, like Tata Steel, the world’s seventh largest steel producer. The Indian steel demand is also slowing down with the lower GDP figures. The 12th Plan thrust on infrastructure, with plans to build ports, airports, roads, railways, power and coal will boost the demand for steel as the infrastructure sector has an elasticity of 0.8% with consumption of steel. The ministry should frame the new policy in such a manner that would boost consumption demand for steel.
Apart from falling demand, the other major problem with the steel industry is the high cost of fuel, with inadequate domestic supplies of coking coal. A fall in coking coal price, with lower global demand, is fuelling Indian steel producers step up imports. Although some private steel manufacturers have acquired coal mines abroad, others are dependent on domestic coal. The steel ministry should ensure that the steel plants begin operations in the captive mines urgently.
Rise in infrastructure spending to boost demand: SAIL chairman (NDTV)
Infrastructure spend to boost steel demand, move to preserve resource welcomed (by FE Bureau, Financial Express)
Speed up Approval Process
The long delays in setting up big-ticket investments in steel plants have not only affected sentiments of foreign investment but have also resulted in supply constraints. The ministry should make attempts to attract investment in other less sensitive areas. For example, while POSCO struggles with starting construction of the large but delayed plant in Odisha, it has begun to build a smaller ht galvanized steel plant in Maharashtra to cater to the demand of the demands of the automobile and consumer demand sectors. Arcellor Mittal has also announced building a smaller plant in non-tribal areas of Jharkhand in lieu of the plant in Chattisgarh. L N Mittal, owner of Arcellor Mittal, has been vocal in expressing his anguish over the delays with land acquisition in Chhatisgarh. The steel ministry should make attempts at allaying such fears of foreign investors.
Fumbling Ministry to Blame for Posco Project Mess (Mail Today)
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