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Monday, September 4, 2006

Global Scenario

" In 2005 World Crude Steel output at 1129.4 million metric tonne was 5.9% more than the previous year. (Source: IISI)

" China remained the world's largest Crude Steel producer in 2005 also (349.4 million metric tonne) followed by Japan (112.47 million metric tons) and USA (93.89 million metric tons). India occupied the 8th position (38.08 million metric tons). (Source: IISI)

The International Iron & Steel Institute (IISI) in its forecast for 2006 has confirmed the trend of recent years of an increase in steel use in-line with general economic growth and with the fastest growth occurring in the countries with the highest GDP growth such as India and China. Apparent world-wide Steel Demand is forecast to grow to between 1,040 and 1,053 million tonnes in 2006 from a total of 972 million tonnes in 2004. This is a growth of 4-5% over the two year period. However, according to IISI the cost of raw materials and energy would continue to represent a major challenge for the world steel industry.

Market Scenario

  • After liberalization, there have been no shortages of iron and steel materials in the country.
  • Apparent consumption of finished carbon steel increased from 14.84 Million Tonnes in 1991-92 to 38.151 million tonnes (Provissional) in 2005-06.
  • Steel industry that was facing a recession for some time has staged a turnaround since the beginning of 2002.
  • Efforts are being made to boost demand.
  • China has been an important export destination for Indian steel.
  • The steel industry is buoyant due to strong growth in demand particularly by the demand for steel in China.


  • Steel industry was delicensed and decontrolled in 1991 & 1992 respectively.
  • Today, India is the 8th largest crude steel producer of steel in the world.
  • In 2005-06, production of Finished (Carbon) Steel was 42.636 million tonnes(Prov).
  • Production of Pig Iron in 2005-06 was 3.856 Million Tonnes (Prov).
  • The share of Main Producers (i.e SAIL, RINL and TSL) and secondary producers in the total production of Finished (Carbon) steel was 37.99% and 62.06% respectively during the period of April-May, 2006.
  • Last 3 year's production of pig iron and finished (carbon) steel is given below:
(in million tonnes)
Category 2003-04 2004-05 2005-06 (Prov.) 2006-07 (April-May 06)
(Prov. estimated)
Pig Iron 3.764 3.228 3.856 7.096
Finished Carbon Steel 36.957 40.055 42.636 0.700

(Source: Joint Plant Committee)

Demand - Availability Projection

  • Demand – Availability of iron and steel in the country is projected by Ministry of Steel annually.
  • Gaps in Availability are met mostly through imports.
  • Interface with consumers by way of a Steel Consumer Council exists, which is conducted on regular basis.
  • Interface helps in redressing availability problems, complaints related to quality.

Pricing & Distribution

  • Price regulation of iron & steel was abolished on 16.1.1992.
  • Distribution controls on iron & steel removed except 5 priority sectors, viz. Defence, Railways, Small Scale Industries Corporations, Exporters of Engineering Goods and North Eastern Region.
  • Allocation to priority sectors is made by Ministry of Steel.
  • Government has no control over prices of iron & steel.
  • Open market prices are generally on rise.
  • Price increases of late have taken place mostly in long products than flat products.

Imports of Iron & Steel

  • Iron & Steel are freely importable as per the extant policy.

  • India has been importing around 1.5 Million Tonnes of steel annually.

  • Last three year’s import of Finished (Carbon) Steel is given below:-


Qty. (In Million Tonnes)









2005-2006 (Prov.)


2006-07 (April-May, 2006) (Prov. estimated)


(Source: JPC)

Exports of Iron & Steel

  • Iron & Steel are freely exportable.

  • Advance Licensing Scheme allows duty free import of raw materials for exports.

  • Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports. Under this scheme exporters on the basis of notified entitlement rates, are granted due credits which would entitle them to import duty free goods. The DEPB scheme was temporarily suspended from 27th March 2004 to 12 July, 2004 for export of steel items. The Scheme has since been restarted. The DEPB rates have also been substantially reduced.
  • Exports of finished carbon steel and pig iron during the last three years is as :

(Qty. in Million Tonnes)

Finished (Carbon) Steel Pig Iron

2003-2004 4.835 0.518

2004-2005 4.381 0.393

2005-2006 (Prov) 4.000 0.224

2006-2007(April-May 06) (Prov.estimated) 0.650 0.048

(Source : Joint Plant Committee)

Duties & Levies on Iron & Steel

Customs Duty

- Peak rate for non-agricultural products reduced from 15 % to 12.5 %.
- Customs Duty on stainless steel and other alloy steel has been reduced from 10 % to 7.5 %. Duty on non- alloy steel remains unchanged at 5%.
- Duty for ferro alloys reduced from 10% to 7.5%.
- Customs Duty on primary and secondary forms of non-ferrous metals viz. Zinc has been reduced from 10% to 7.5%.
- Duty on steel melting scrap has been raised to 5%.
- Duty on refractories reduced to 7.5 %. Duty most of the raw material for manufacture of refractories has also been reduced to 7.5%.
- Duty on ores and concentrates reduced from 5 % to 2 %. In respect of Ministry of Steel this would mean a reduction in duty of 3% on iron ore, manganese ore and chrome ore.
- The Special Countervailing Duty (CVD) of 4 % to be imposed on all imports with a few exceptions viz. ships for breaking, coal and coke etc. Full credit to be allowed to manufacturers of excisable goods.

Service tax:

Service tax rate increased from 10% to 12%.

Direct Taxes:

No change in rates of personal income tax or corporate income tax. No new taxes are also being imposed.

Levies on Iron & Steel

SDF LEVY- This was a levy started for funding modernisation, expansion and development of steel sector.

The Fund, inter-alia, supports :

1) Capital expenditure for modernisation, rehabilitation, diversification, renewal & replacement of Integrated Steel Plants.

2) Research & Development

3) Rebates to SSI Corporations

4) Expenditure on ERU of JPC

  • SDF levy was abolished on 21.4.94
  • Cabinet decided that corpus could be recycled for loans to Main producers
  • Interest on loans to Main Producers be set aside for promotion of R&D on steel etc.
  • An Empowered Committee has been set up to guide the R&D effort in this sector.
  • EGEAF – Was a levy started for reimbursing the price differential cost of inputs used for engineering exporters. Fund was discontinued on 19.2.96.

Opportunities for growth of Iron and Steel in Private Sector

The New Industrial Policy Regime

The New Industrial policy has opened up the iron and steel sector for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario.

The Growth Profile

(i) Steel

The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new/greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies.

At present, total (crude) steel making capacity is over 34 million tonnes and India, the 8th largest producer of steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. As per the ratings of the prestigious " World Steel Dynamics", Indian HR Products are classified in the Tier II category quality products – a major reason behind their acceptance in the world market. EU, Japan have qualified for the top slot, while countries like South Korea, USA share the same class as India.

(ii) Pig Iron

In pig iron also, the growth has been substantial. Prior to 1991, there was only one unit in the secondary sector. Post liberalization, the AIFIs have sanctioned 21 new projects with a total capacity of approx 3.9 million tonnes. Of these, 16 units have already been commissioned. The production of pig iron has also increased from 1.6 million tonnes in 1991-92 to 5.28 million tonnes in 2002-03. During the year 2003-04, the production of Pig Iron was 5.221 million tonnes.

Source: Ministry of Steel

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