India Steel Conclave 2008
July 16, 2008, New Delhi

Speech by Mr Ram Vilas Paswan, Hon'ble Minister for Steel

Shri Rajeev Chandrasekhar, Hon'ble Member of Parliament & President FICCI, Shri R.S. Pandey, Secretary (Steel), Shri Govindrajan, Member Secretary NMCC, Shri S. K. Roongta, Chairman, SAIL, Shri Muthuraman, CMD-Tata Steel, Shri Amit Mitra, Secretary General, FICCI and other dignitaries, guests and participants. I am indeed happy to be present on the occasion of `National Steel Conference' organized by FICCI. The Conference has come at a very right moment when the Indian steel sector is in limelight due to various recent developments, including rise in steel prices.

Recently, Indian steel sector has received a lot of attentions on account of rising steel prices in the domestic market, since February 2008. The prices rose as much as 40-50% between January and May 2008, when Government had to step in for inflation management in the steel sector. But, I am happy to note that the Indian major steel producers have kept up with their assurance given to Prime Minister on 5th May and have maintained their prices until now. I hope the major steel producers will continue to support the Government in its effort in managing the ongoing inflationary trend in the country.

Until the Government stepped in, Indian steel prices used to be determined by the International Price, based on the landed cost of import. A sudden demand of steel in the international market combined with the sharp rise in crude oil prices caused Indian steel prices to skyrocket. When the situation became a matter of concern Government had to resort to fiscal measures by way of imposition of export duty on certain steel products. Government also took certain other measures in last week of April, such as reduction of import duty to NIL on all non-alloy steel products and certain key raw materials such as zinc, ferro-alloys and metcoke as well as reduction of CVED to NIL on TMT Rods and Bars. At the same time my Ministry had a series of meetings with major steel producers, secondary steel producers and various steel consumers discussing out the issues and problems. All this has led to dramatic effect in making steel prices stable in the domestic market. The difference between the landed cost of import and domestic prices now stands at Rs 13,000 to Rs 15,000 per tonne of steel. Had my Government not taken the right steps in time, the domestic steel price would have been higher by at least Rs 10,000 per tonne, over the current prices.

I again express my sincere thanks to the Indian steel industry and hope they would continue to support the efforts of Government in future. I and the Secretary (Steel) will also continue to listening to your problems and take appropriate actions in helping the industry in solving their various problems. I have also noted with concern that, certain dealers and traders have sold the flat steel products at higher than market price, taking advantage of the high demand in the retail market. We will take up very severely with such market manipulations. We have already directed the PSU steel companies to keep a strict watch on such malpractices. I request the other producers to keep a similar watch on their retail and distribution network. A transparent price information combined with frequent publication in Press and TV media will go on a long way in eliminating the market manipulations by a handful of traders.

Any abrupt increase in price is always an indicator of the need for increase in supply. Although our steel demand has been rising steadily in 11-13% range, the production has only grown by 5.6% during 2007-08. There are a large number of projects currently in the pipeline including the major ones such as expansion plan of SAIL, RINL, Tata, Essar, JSW and JSPL. A number of greenfield projects are also at different stages of progress including the large foreign investment projects such as Posco and Arcellor-Mittal. I have been told that, the brownfield projects are progressing well whereas some of the greenfield projects are lagging behind their schedules by 1-2 years period. My Ministry is closely monitoring the major steel investment projects for which an Inter-Ministerial Group (IMG) has been functioning under the Chairmanship of Secretary (Steel) since last year. The progress of public sector steel units are also being closely monitored at my level as well as at the level of Secretary. By the year 2012, it is estimated that India would have a steel production capacity of 124 million tonnes from the current level of 59 million tonnes. Taking into account the investments in pipeline Indian steel production capacity would be nearly 243 million tonnes by the year 2020. This will take India from the current 5th largest steel producer to 3rd largest by 2015 and 2nd largest by 2020, next only to China.

However, such a massive investment in the steel sector will involve a number of issues to be sorted out. Steel is a highly capital intensive industry which depends upon allocation of raw material resources, land, water, environmental & forest clearances as well as development of huge infrastructure. A part of the issues have to be looked into by the State Governments concerned. When I had last reviewed the position in March 2008, I had found that in some of the States even the Rehabilitation & Settlement (R&R) Policy was not formed. Land Acquisition and forest clearances are the two major bottlenecks being faced by most of the greenfield steel projects. There is also the issue of delay in iron ore mining lease to major steel producers. Even, SAIL facing problems in iron ore mining lease renewal. RINL is yet to get any iron ore mining lease, after achieving nearly 3 million tonne capacity. I hope the Conference will deliberate on these key issues affecting investment and suggest a way regarding how Investors and the Governments, both Central and State can expedite the steel investment in the country.

India is endowed with significant iron ore reserves, estimated at 25-25 Billion tonne. However, the proven economically mineable reserve is only 7.2 billion tonne, of which the high reserve grade is only 1.3 billion tonne. Considering we will be producing more than 200 million tones of steel in another 10 years, there is an urgent need for conservation of our scarce natural resources. More than that, there is also a need for effective utilization of low-grade iron ore and fines, through suitable benefication technologies. Our future sustenance and self-sufficiency would depend upon this issue of adaptation of technology for utilization of fines and low-grade ores, including magnetite. The Conference must address upon this important issue.

National Steel Policy aimed at a steel sector, which is not only productive but achieves global benchmark in terms of efficiency. The world is now concerned about energy efficiency and Carbon Dioxide control measures. The steel-making involves various processes that result in extensive consumption of natural resources and energy. Unfortunately, our domestic benchmarks are far below the world standards. My Ministry has already formulated a technology mission in helping the Indian steel industry achieve the global standards of energy and environmental efficiencies. I hope the industry to take full participation in this national mission.

Steel industry and the associated mining activities are usually located in relatively underdeveloped regions of the country, dominated by underprivileged and tribal population. The industry has a responsibility for looking after the needs of the local population and act as a facilitator for social development. Corporate Social Responsibility (CSR) assumes a significant role in this area. My Ministry has already taken a leading role in implementing CSR activities. All profitable PSUs have made commitments to the cause of CSR and have earmarked at least 2% of their distributable surplus for CSR activities. The total budget allocation for CSR in respect of all PSUs for 2007-08 is around 230 crore with major contribution from SAIL at 100 crore, RINL at 34 crore and NMDC at 89 crore. The CSR activity is focusing on environment, family welfare, education, health, cultural development as well as building social infrastructure, water supply and sanitation activities. The PSUs also did commendable job in taking active part during devastating flood in some parts of U.P. and Bihar during last year.

We have also asked the main producers to adopt villages around their plant locations as a part of the CSR activities. Use of steel has been emphasized in items such as storage beans, bullock carts, school building, panchayat offices, water tanks and waiting sheds. Around 155 buildings have been short listed by SAIL (79), RINL(5), MOIL (5) and NMDC (66) for adoption as model steel villages. SAIL has already completed the work of 13 model steel villages in 2007-08. I request all major private sector steel producers to take similar steps in CSR activities in a big way including development of model steel villages.

I understand that the National Conference will be addressed by eminent persons from the industry as well as representatives from some of the State Government. I request the participants delegates to really focus upon the key issues affecting the growth and development of Indian steel industry into a world leader in achieving long term sustainability and strength. I wish the Conference all success.

Thank you.