The steel industry, in general, is on the upswing, due to strong growth in demand propelled particularly by the demand for steel in China. The world scenario coupled with strong domestic demand has benefited the Indian steel Industry.

During April-December 2004- 05, production of finished steel recorded a growth of 4 percent over the corresponding period of the previous year to reach 28.3 million tonnes. This growth rate, however, was lower than the growth rate in the preceding two years. Consumption of finished steel grew by 5.9 percent and increased to 24.9 million tonnes, during the same period.

The faster growth of domestic consumption relative to production was reflected in a decline in exports of finished steel (2.6 million tonnes) by 18.2 percent compared to the corresponding period of previous year. Production of pig iron is falling due to the integration of the steel making process with the production of pig iron being consumed as a raw material in the process itself.

World steel prices rose from December 2001 onwards. The price increase of hot-rolled (HR) coils, during January 2002 to December 2004 was from US$ 140 - 175 per tonne to about US$ 550 - 600 per tonne. The prices of steel melting scrap rose from a low of US$ 93 - 94 per tonne to US$ 275 - 285 per tonne.

As part of building up infrastructure, India has started a tremendous programme of highway construction across the country. As a result, domestic steel demand has risen.

The increased production of steel has in turn led to rise in prices of raw materials like scrap, coking coal and metallurgical coke. The wholesale price index (WPI) for iron and steel, has increased by 35 percent to 202.1 in 2003-04, and further to 237.8 in the current year up to December 31, 2004.

STEPS TAKEN TO BOOST STEEL INDUSTRY

In budget 2004-05, the customs duty on nonalloy steel was reduced from 15 % to 10 per cent and on alloy steel from 20 per cent to 15 per cent. In August 2004, the customs duty on non-alloy steel was further reduced from 10 per cent to 5 per cent; on meltingscrap from 5 per cent to 'zero' and on ships for breaking from 15 per cent to 5 per cent.

Further, customs duty on several raw materials used by the steel sector like noncoking coal, metcoke and nickel has been reduced to 5 per cent and on coking coal to 'zero'.

To bring down the prices of steel, the excise duty on steel products was reduced from 16 per cent to 8 per cent with effect from February 28, 2004 with a caveat that the duty regime will be reviewed. Budget 2004-05 revised this partially by increasing the duty from 8 per cent to 12 per cent, as the intended impact of duty cut on moderating prices was not achieved.
WHAT IS FURTHER NEEDED

While the increase in the domestic prices of steel because of an increase in international demand cannot be avoided , attention needs to be paid to the problem of adequate and reliable supply of coal to the steel industry. Efforts are required for securing assured linkages of coking coal from overseas sources.

Furthermore, cross-border investment in captive coal mines, especially for coking coal, in major source countries as well as investment for developing coal mines in India, need to be encouraged. Further, the movement of raw materials and finished steel would need good rail and road network as well as substantial improvement in port handling, storage and haulage facilities.