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Steel is crucial for modern economic development and a country's level of steel consumption correlates with living standards. The Indian steel industry has a long history dating back to ancient times. In the modern era, key developments included the founding of Tata Steel in 1907. Post-liberalization, the industry has seen foreign investment increase, price controls removed, and new capacity added. India is now the fifth largest steel producer but has potential for increased consumption per capita. The industry faces high costs but benefits from domestic raw materials and labor.

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77 views6 pages

Chapter

Steel is crucial for modern economic development and a country's level of steel consumption correlates with living standards. The Indian steel industry has a long history dating back to ancient times. In the modern era, key developments included the founding of Tata Steel in 1907. Post-liberalization, the industry has seen foreign investment increase, price controls removed, and new capacity added. India is now the fifth largest steel producer but has potential for increased consumption per capita. The industry faces high costs but benefits from domestic raw materials and labor.

Uploaded by

Maria Sebastian Manjaly
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© Attribution Non-Commercial (BY-NC)
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CHAPTER-1 INTRODUCTION

Introduction
Steel is crucial to the development of any modern economy and is considered to be the backbone of human civilization. The level of per capita consumption of steel is treated as an important index of the level socio-economic development and living standards of the people in any country. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flows and income generation. All major industrial economies are characterized by the existence of a strong steel industry and the growth of many of these economies has been largely shaped by the strength of their steel industries in their initial stages of development. Steel industry was in the vanguard in the liberalization of the industrial sector and has made rapid strides since then. The new Greenfield plants represent the latest in technology. Output has increased, the industry has moved up in the value chain and exports have risen consequent to a greater integration with the global economy. The new plants have also brought about a greater regional dispersion easing the domestic supply position notably in the western region. At the same time, the domestic steel industry faces new challenges. Some of these relate to the trade barriers in developed markets and certain structural problems of the domestic industry notably due to high cost of commissioning of new projects. The domestic demand too has not improved to significant levels. The litmus test of the steel industry will be to surmount these difficulties and remain globally competitive.

Indian steel industry


During Ancient Period
The history of iron and steel making in India goes back by several centuries. It dates to 480 BC when archers in India used arrows tipped with steel. The iron pillar of Dhar near Indore in Madhya Pradesh dates back to about 321 AD, the iron pillar of Kutab Minar near Delhi dates back to about 400 AD and the iron beams of Sun temple of Konark in Orissa dates back to 13th century. These pillars are a testimony to ancient India's expertise in the making of steel.

Before Independence
The roots of the Indian Steel industry in modern times can be traced to the year 1874, when a company called Bengal Iron works at Kulti near Asansol in West Bengal produced iron. One of the most important landmarks in the history of Indian steel industry was the commencement of the Tata Iron and Steel Company at Jamshedpur in the state of Bihar in 1907.The other prominent steel manufacturers before independence were Indian Iron and Steel Company (1922),Mysore Iron and Steel Works(1923) and Steel Corporation of Bengal (1937).

After Independence
The roots of the Indian Steel industry in modern times can be traced to the year 1874, when a company called Bengal Iron works at Kulti near Asansol in West Bengal produced iron. One of the most important landmarks in the history of Indian steel industry was the commencement of the Tata Iron and Steel Company at Jamshedpur in the state of Bihar in 1907.The other prominent steel manufacturers before independence were Indian Iron and Steel Company (1922),Mysore Iron and Steel Works(1923) and Steel Corporation of Bengal (1937).

Post Liberalization
The post liberalization scenario in the Indian Steel industry has witnessed a monumental shift. Some of the salient features are:

The need for license for increasing capacity has been abolished. Steel industry has been removed from the list of Industries under the control of state sector. Foreign equity investment in steel has gone up to 74%.

In January 1992 the price and distribution controls were removed. Policies like convertibility of rupee on trade account, freedom to mobilize resources from overseas financial markets and restructuring of existing tax structure have immensely benefited the industry.

CURRENT PERFORMANCE OF INDIAN STEEL INDUSTRY


India is currently the fifth largest steel-producing nation in the world with production of over 65.6 million tonnes (MT). However, it has a very low per capita consumption of steel of around 51.7 kgs as against an average of 203 kgs of the world. This wide gap in relative steel consumption indicates that the potential ahead for India to raise its steel consumption is high.

During the period from 1997-98 to 2000-01, steel production witnessed a marginal CAGR growth of 3%. However during 2001-02 to 2010-11, owing to boom in the infrastructure and automobile sectors, the industry witnessed a sharp turnaround and registered a steep hike of 8.6% CAGR.

Being a core sector, steel industry tracks the overall economic growth in the long term. Also, steel demand, being derived from other sectors like automobiles, consumer durables and infrastructure, its fortune is dependent on the growth of these user industries.

The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic steel industry, with companies like Tata Steel being one of the lowest cost producers in the world.

However, Indian steel companies have to bear additional costs pertaining to capital equipment, power and inefficiencies (low per employee productivity). This has resulted in the erosion of the edge they would have otherwise enjoyed due to availability of cheap labour and raw materials.

India is likely to add 30 m tonnes of new steel capacity over the next 18 months, of which 21 m tonnes will be added by top five players. This will make India net exporter of steel from the current net importer.

Key Points

Supply

With trade barriers having been lowered over the years, imports play an important role in the domestic markets. Currently India is net importer of steel.

Demand

The demand is derived from sectors that include infrastructure, consumer durables and automobiles.

Barriers to entry Bargaining power of suppliers Bargaining power of customers Competition

High capital costs, technology, economies of scale, government policy.

Low for fully integrated players who have their own mines for raw materials. High, for non integrated players who have to depend on outside suppliers for sourcing raw materials. High, presence of a large number of suppliers and access to global markets.

High, presence of a large number of players in the unorganized sector.

CHAPTER-2 THEORETICAL FRAMEWORK


TATA STEEL LIMITED
Tata Steel Limited is a diversified steel producer. The Companys operations include manufacturing of Steel and Ferro Alloys, and Minerals Business. Other business segments consist of Tubes and Bearings. The Companys principal products include flat rolled products of non alloy steel of a width of 600 millimeter and more hot rolled coils of thickness 1.66 millimeter to 12 millimeter; tubes/pipes of circular section with outer diameter upto 114.3 millimeter, not cold rolled, and flat rolled products of iron or non alloy steel, of a width of 600 millimeter or more, cold rolled (cold-reduced), not clad, plated or coated of a thickness of 0.5 millimeter or more but less than three millimeter. Tata Steels production facilities include those in India, the United Kingdom, the Netherlands, Thailand, Singapore, China and Australia. Effective September 27, 2011, Centennial Steel Company Limited merged with the Company.

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