By Sohrab Darabshaw
With a new Prime Minister and a new government in place, India’s steel sector eagerly awaits the first initiatives to create a course correction to reboot steel production.
Trade organizations as well as India’s Steel Ministry have put forth a slew of suggestions, some of them longstanding, to the new government to boost production. Ideally, as per the ministry’s version, the initiatives should be taken in a manner to raise India’s steel production capacity to 300 million tons per annum (mtpa) within the next 10 to 15 years from today’s around 100 mtpa. The steel ministry’s suggestion includes the following:
• Diluting the stake in public sector units to 51 percent
• Ensuring raw material security to steel makers
The Steel Ministry made the presentation to the new Modi administration’s Cabinet Secretary, recently, where it made these recommendations. The logic of bringing down the government’s ownership in steel companies was to re-utilize the monies obtained from the sale of the government’s shares for development.
According to a report in MoneyControl.com, the Indian Government holds majority stakes in Steel Authority of India (SAIL), Rashtriya Ispat Nigam (RINL), iron ore miner NMDC Ltd, manganese ore producer MOIL Ltd, and pellet maker KIOCL Ltd, all of which are frontline companies.
While the Government has an 80 percent stake each in SAIL, NMDC and MOIL, RINL and KIOCL are yet to be listed. By cutting down its own stake in these companies and bringing it down to 51 percent, the Government can earn in millions which it can divert for reforms or other uses.
The Confederation of Indian Industry (CII), a representative body of Indian industry, seems to be in sync with the Steel Ministry’s thinking. It has called for a comprehensive agenda for the new government to accelerate growth in the steel sector, by building capacity for 300 mtpa by 2025.
Addressing a high profile CII meeting late last week, C.S. Verma, Chairman of CII’s National Committee on Steel, laid bare the key areas of improvement for the sector.
These included ensuring the availability of iron ore and coal mines to existing steel plants, improving viability of the alloy and stainless steel sector, and rationalizing the railway freight structure so that there is no cross-subsidization. Verma is also the Chairman of SAIL.
The steel ministry has also suggested that there was a need to reform the current raw material policy and allot captive mines to steel producers so that they meet at least half of their long-term requirements. The other suggestions include:
• Introduce a single-window mechanism for streamlining the allocation of raw materials
• Create “special mining zones” through legislation and prepare comprehensive environment and forest management plans for areas declared to be bearing raw materials like iron ore and coal”
The Ministry has suggested that to achieve this goal, special purpose purchasing and procurement vehicles need to be created in collaboration with state governments to fast-track land acquisition and create statutory clearances. It also sought the creation of a National Institute of Steel either as a university or deemed university for meeting the technical requirements of the growing steel industry and for nurturing research and development initiatives.
The CII will be presenting a detailed recommendation to the new government to achieve the target of 300 mtpa by 2025. A report in Mint.com said that Verma’s stress was on releasing India’s coking coal potential for the steel industry, since that remained a challenge despite India having adequate resources of iron ore and coal available.
“India’s coking coal potential must be unleashed for the steel industry in the national interest. Also, there is a need for faster environmental and forest clearances on a single window basis,” Verma was quoted as saying in the report.