A preliminary survey on the development of the Indian steel industry after the economic liberalisation

1
A preliminary survey on the development of the
Indian steel industry after the economic
liberalisation

• Hajime SATO
• Institute of Developing Economies

2
Overview

• Crude Steel Production in India in 2004 was 32.6
  million tonnes, the ninth largest in the world.
• The steel industry in the total manufacturing
• 10 in the value added (fluctuating)
• 8 in the employment but decreasing to 6 after
  1991

3
Features of the Indian steel Industry

• Abundant supplies of raw materials
• Integrated plants located inland
• Development designated to public sector up to
  1991
• Highly regulated and protected markets till 1991
• Relatively slow technological up gradation

4
Brief history

• Before 1945, iron making developed, steel making
  weak
• After independence, strong state initiatives and
  controls (IPA)
• IDRA (industrial licenses for entry, expansions
  etc.)
• Succeeded in installing integrated plants(Bhilai,
  Rourkela, Durgapur) in the early 1960s. The three
  expanded and Bokaro and VSP added in 70s and 80s.
  But after all, stagnated from the mid-1960s to
  1990.

5
Policy Changes

• Industrial and Trade Policy Resolutions in 1991
  with regard to the Steel industry
• Exempted from industrial license system
• Abolition of price controls
• Liberalising conditions for FDIs
• Liberalisation of imports and exports
• Lowering tariff level
• In short, steel companies compete more freely in
  domestic and international markets than before

6
Changes in Technology

• Steel making process
• Iron making Rise of DRI(HBI/sponge iron)
  production
• Steel making Replacement of OHF with BOF/EAF,
  Introduction of CC
• Rolling Introduction of flat making capacity(hot
  strip mill, cold rolling lines)
• Labour Productivity increasing

7
Structural Changes

• Public v. Private New entry of private firms
• Integrated v. non-integrated New types of
  integrated makers, EAF-Rolling makers, Iron
  makers, Small EIF makers
• Dual structure efficient? Integrated and big EAF
  makers v. Small EAF and EIF makers

8
Consumption and Trade

• Apparent consumption per head extremely low
• Relative increase of flat products consumption
  domestically
• Imports stable up to 2003, hot rolled coils
  decreasing while hot rolled sheets increasing
• Exports increasing, not least hot rolled coils
• ExportersThe share of SAIL, RINL and TISCO
  decreasing, new comers exporting.

9
Conclusion

• Problems faced
• Raw materials
• Infrastructure
• Labour
• Environment
• Finance

• Changes after the economic liberalisation
• Steel production and export increased much faster
  than before
• This increase attributable to new comers
• Technology catching up rapidly
• New type of steel firms appeared
• Flat products imported and exported

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