FISCAL AND ADMINISTRATIVE MEASURES BRING ABOUT STABILITY IN STEEL PRICES - SHRI PASWAN

Press Information Bureau
Government of India
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FISCAL AND ADMINISTRATIVE MEASURES BRING ABOUT STABILITY IN STEEL PRICES - SHRI PASWAN

Kolkata : September 20, 2008

The recent fiscal and administrative measures taken by the government has brought about stability in steel prices. The Union Minister for Steel Shri Ram Vilas Paswan said this while inaugurating the 8th Asian Steel Conference in Kolkata. He said the recently the government had to take certain fiscal and administrative measures in order to control the domestic price of steel as rising inflation in the economy was affecting the common man. The net effect caused the domestic price to be Rs.8000-Rs.10000 lower than the international market during the worst period of May-June this year. The import duty on all non-alloy steel products, metcoke, coal, ferro-alloys, scrap and zinc has also been withdrawn so that steel is available at a cheaper cost in the domestic market. The current phase of stability in steel prices are due to the various efforts made by government during the past five month period, the Union Minister said.

Referring to some of the concerns regarding steel availability, Shri Paswan said the current rate of production growth is nearly 5 per cent over the demand growth of 10-11 per cent. In the short run the supply side has shown somewhat sluggish growth in creation of new capacity, especially in the large scale production facilities. Supply from this sector has been growing slowly at around 6 per cent in the last 5 years. Increased supply from this sector in the short run is not very bright as these units are already operating at more than 100% capacity utilisation. The gap has been filled the secondary steel producers dominated by sponge iron, pig iron, electric arc furnace and induction furnace. This sector has been growing at 12% in the last five years, Shri Paswan informed. He expressed the hope that the demand supply gap would be bridged in near future. Emphasizing the need for sorting out major bottle necks such as allocation of raw material resources like iron ore, coal, land, water and delay in environmental and forest clearances as well as requirement of huge infrastructure, the Minister said that the government is committed to achieve the revised target of creation of new steel capacities to support the projected growth rate of the Indian economy. India being one of the lowest cost producers of steel in the world, it is expected that our cost competitiveness derived basically from low cost iron ore and labour would be further improved as we bridge efficiency gaps with the rest of the world. Our energy consumption rates are getting lower by the year. We expect that the process of assimilation of better technology would improve Indian steel's competitiveness further, Shri Paswan said.

The Minister also touched upon the considerable progress of the Indian Steel Industry in the last decade. He said that the growth in consumption and production had been especially impressive. In the five years of the 10th five year plan, production has increased to 52.53 million tonnes registering an average annual growth rate of 9.5%. In the same period consumption grew annually by 10.1% to reach 46.78 million tonnes. In the first year of the 11th five year plan production of steel reached 57.14 million tonnes growing by 8.8% while consumption grew at the rate of 10.1% to reach 51.50 million tonnes. Huge funds allocated by the UPA government for social sectors such as Bharat Nirman Yojana, Pradhan Mantri Gram Sadak Yojana, National Urban Renewal Mission etc has caused rising steel demand in social sectors and contributed to the accelerated rate of growth of steel consumption and production in India in recent years. All of these projects and activities are highly steel-intensive and double digit growth rates in all these areas achieved in the last 4-5 years have given a tremendous fillip to consumption of steel in India. Over and above it is expected that nearly Rs.20 lakh crore will be spent in the infrastructure sector such as railways, roads, ports, communications etc during the 11th five year plan period, the Minister said.

Noting that India is the 5th largest steel producer in the world and a member of the economically rising Asian steel community, Shri Paswan said that the time is indeed opportune for this Conference of Asian steel producers as Asia has taken the centre stage of the global steel industry. Today Asia boasts of having four of the 10 top most steel producers in the world. China with a production of 489.2 million tonnes is the largest steel producer globally, followed by Japan in the second place with a production of 120.2 million tonnes, India in the 5th place 53.1 million tonnes and South Korea occupying the 6th place producing 51.5 million tonnes, Shri Paswan said.
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