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The steel industry in India can play a crucial role in leading India towards a 5 trillion economy by 2025. According to the EY-CII report titled ‘Steering India into a US$5 trillion economy with Steel’, the growth of steel industry in India has been consistent at a CAGR of about 5% y-o-y. With the surge in demand across sectors including rail, road, aviation, gas pipeline, and housing, the steel sector has made record production over the years.
It is a fact that steel is the most important metal for engineering and construction industry. It is widely used in manufacturing of cars, automobiles, construction to medical devices. It can also be recycled without loss of property.
The purpose of this blog is to explore the current state of the steel industry in India, including its growth and future prospects.
What is the history and present scenario of steelmaking in India?
As per statistics, (Source: IBEF) India was the world’s second-largest producer of crude steel, with an output of 10.14 MT as of April 2022, In FY2022, the production of crude steel and finished steel was at 133.596 MT and 120.01 MT, respectively. The production of crude steel and finished steel stood at 71.56 MT and 68.17 MT respectively in April-Oct 2022. The current installed capacity of the industry is about 140 million tonnes per annum (mtpa) and the government aims to improve it to 300 mtpa by 2030. The primary reason for the growth in the Indian steel sector are two factors – domestic availability of raw materials such as iron ore and cost-effective labour.
While the practice of steel making in India can be traced back to as long as 1600 BCE, where the metal was used to manufacturing swords, pillars, and structures, the foundation of modern Indian steel industry began around 1907 in Jamshedpur. The sector gained ground since 1939 when the government started supporting steel projects and provided access to finer grade ore to the industry.
In 1973, the Steel Authority of India (SAIL) was founded in a bid to manage the major steel-producing units at Bhilai, Bokaro, Burnpur, and Rourkela. This also led the government to introduce a liberalised steel policy (NSP 2017) that helped propel the sector to its current standing and its surge ahead. With the emergence of several major players including Tata Steel Limited, Hindalco, Jindal Steels, Essar, Bhushan, RINL, etc. the industry continues to grow in terms of technical expertise and growth.
Steel is produced today in many grades and forms. The four main types of steel include carbon steels, alloy steels, stainless steels, tool steels. Some of the more in demand forms of steel include steel coils, steel plate, etc. that finds wide usage in every industry.
What are some government initiatives for the steel sector?
Some of the recent government initiatives for MSMEs in the steel industry in India are:
- The guidelines for approved specialty steel production-linked incentive (PLI) scheme announced by the government in October 2021
- MoU signed between India and Russia in October 2021 to carry out R&D in the steel sector and produce coking coal
- The production-linked incentive (PLI) scheme for specialty steel was approved in July 2021 by the Union Cabinet that is expected expand specialty steel capacity by 25 million tonnes (MT)
- Allocation of ₹47 Crore to the Ministry of Steel to create infrastructure and manufacturing to propel the economy under the Union Budget 2022-23
What are the challenges associated with the steel industry in India?
It is evident that the iron and steel sector has undergone tremendous change in the past 30 years and there has been a huge transition from old technologies to state-of-the-art production with adoption of principles such as TPM, 5S, Lean. However, this industry has its own set of challenges that prevents its growth. The main points are discussed below:
- Capital intensive – There is a huge requirement of capital required for acquiring iron ore mines, coal, and other raw materials to set up a modern production plant. This acts as a barrier for aspiring businesses to enter this sector and also makes it difficult for existing manufacturers.
- Logistics – Another major challenge for the Indian steel companies is managing logistics. Due to the geography, transportation gets very tough and costly. Secondly, most of the steel plants in India are inland making it difficult to bring in raw materials and transporting the finished products through ports. Most businesses manage logistics through its vast railway network transportation as roadways is economically not feasible. Affordable logistics solution is a primary goal for all steel manufacturers which if not attended to can impact the end prices of steel.
- Taxes and regulation – While the government of India has extended a lot of support to the steel industry in the form of schemes and incentives, the taxes and cess involved increase the final cost of the product by 25%. This impacts the domestic demand and sector competitiveness. Additionally, there are export and import duties applied on steel metal to be considered that also affects the final cost of steel.
- Raw material – A huge amount of raw material is required to product steel. For example, in order to make a tonne of steel, 1.6 tonnes of iron ore and around 0.450 tonnes of coke are required. India is rich in iron ore, but the store is fast dwindling.
- Environmental and energy conservation – Steelmaking contributes towards environment degradation and hence often raise concerns about it from conservationists. Countries like China has already put restrictions on its manufacturers to reduce carbon emission and India will soon need to do it.
- Technology adoption – Most steel factories in India are still using old and conventional methods for production because it is safe and requires minimal investment. However, if the steelmakers need to improve the quantity and quality of steel, adoption of technology is a must.
What are the modern methods suitable for growth of steel industry in India?
With the advent of Industrial revolution 4.0 and the massive digital disruption happening in the manufacturing sector, the steel industry needs to upgrade itself to improve process efficiency and productivity. Some of the modern methodologies that the steel industry can adopt in India include:
- Automation that involves connecting the production process to a mechanised system using sensors, predefined actions, and system interfaces. This will help in reducing human dependence and improving working efficiency.
- Digital manufacturing that will help in identifying and resolving production flaws and improving product acceptance
- Industrial IoT is the latest technology that allows machinery and sensors to communicate with each other and manage feeding rates to adjust product quality based upon the data received.
- Additive manufacturing is another practice aimed at eliminating waste production and improving product tolerance.
To sum up: What is the future of steel in India?
Steelmaking in India is one of the oldest industries and is yet to adopt to the disruptive technologies that is imperative to improve quality and quantity of production. In the coming decade there is a surge of demand for steel. With more and more businesses adopting technology, the future growth of steel industry in India is assured with an increase of value-added products, better operation process, reduced lead time, and more environmental-friendly method of production in the years to come.
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