YEAR END REVIEW 2009
INDIA EMERGES AS THE FOURTH LARGEST STEEL PRODUCER IN THE WORLD
BECOMES THE 2ND LARGEST PRODUCER OF CRUDE STEEL
STEEL CONSUMPTION GROWS BY 6.8 PERCENT DURING APRIL-NOVEMBER 2009
Steel sector trends
With production of 46.77 million tonnes of crude steel during the period January-October, 2009,
India emerged as the fourth largest steel producer in the world and is expected to become the 2nd largest producer of crude steel in the world by 2015, provided all requirements for creation of fresh capacity are adequately met.
India also maintained its lead position as the world's largest producer of direct reduced iron (DRI) or sponge iron. Sponge iron production for sale was 20.8 million tonnes in 2008-09 which was higher by 2.1% over 2007-08.
The country is likely to achieve a crude steel production capacity of 124 million tonnes by the year 2012.
222 Memorandum of Understanding (MoUs) have been signed by the investors with various State Governments for setting up additional 276 million tonnes of steel capacity in the country.
Major investment plans are in the States of Orissa, Jharkhand, Karnataka, Chhattisgarh and West Bengal.
India emerged as the fourth largest steel producer in the world and is expected to become the 2nd largest producer of crude steel in the world by 2015, provided all requirements for creation of fresh capacity are adequately met.
India also maintained its lead position as the world's largest producer of direct reduced iron (DRI) or sponge iron. Sponge iron production for sale was 20.8 million tonnes in 2008-09 which was higher by 2.1% over 2007-08.
The country is likely to achieve a crude steel production capacity of 124 million tonnes by the year 2012.
222 Memorandum of Understanding (MoUs) have been signed by the investors with various State Governments for setting up additional 276 million tonnes of steel capacity in the country.
Major investment plans are in the States of Orissa, Jharkhand, Karnataka, Chhattisgarh and West Bengal.
Production, Consumption and Growth of Steel
The National Steel Policy 2005 had projected an annual steel consumption growth of 7 % based on a GDP growth rate of 7-7.5% and production of 110 million tonnes of crude steel by 2019-20. Going by the existing growth trends these estimates are likely to be exceeded and it is envisaged that in the next five years, demand will grow at higher annual average rate of over 10% as compared to around 7% growth achieved between 1991-92 and 2005-06.
• Production for sale of total finished steel at (alloy + non-alloy) was at 38.961 million tonnes during April-November, 2009 as against 38.024 million tonnes in corresponding period of 2007-08, a growth of 2.5%.
Exports of total finished steel (alloy + non-alloy) was at 1.81 million tonnes during April-November 2009 as against 2.952 million tonnes in corresponding period of 2007-08, a decline of
39%.
Imports of total finished steel (alloy + non-alloy) was at 4.59 million tonnes during April-November, 2009 as against 4.134 million tonnes in corresponding period of 2007-08, a growth of 11%.
Consumption of total finished steel (alloy + non-alloy) was at 34.304 million tonnes during April-November, 2009 as against 33.995 million tonnes in corresponding period of 2007-08, a growth of 6.8%.
Performance of PSUs and companies under the Ministry
• Production for sale of total finished steel at (alloy + non-alloy) was at 38.961 million tonnes during April-November, 2009 as against 38.024 million tonnes in corresponding period of 2007-08, a growth of 2.5%.
Exports of total finished steel (alloy + non-alloy) was at 1.81 million tonnes during April-November 2009 as against 2.952 million tonnes in corresponding period of 2007-08, a decline of
39%.
Imports of total finished steel (alloy + non-alloy) was at 4.59 million tonnes during April-November, 2009 as against 4.134 million tonnes in corresponding period of 2007-08, a growth of 11%.
Consumption of total finished steel (alloy + non-alloy) was at 34.304 million tonnes during April-November, 2009 as against 33.995 million tonnes in corresponding period of 2007-08, a growth of 6.8%.
Performance of PSUs and companies under the Ministry
• Profit after Tax (PAT) of the Companies with this Ministry have gone up around four times, from Rs. 4819 crore in 2003-04 to Rs. 12792 crores in 2008-09.
• The contribution of PSUs to Central and State Government exchequer by way of excise duty, customs duty, dividend, corporate tax, sales tax, royalty etc. has gone up by has gone up by 210 % from Rs. 5,829 crore in 2003-04 to Rs. 18,082 crore in 2008-09.
• Net worth of major PSUs under the Ministry of Steel grew by quantum leaps, indicating their robust financial health. The net worth of SAIL, RINL, NMDC, MOIL, MSTC and KIOCL as on 31.3.2004 were Rs. 4,659 crore, Rs. 4,852 crore, Rs. 1,967 crore, Rs. 139 crore, Rs. 83 crore and Rs. 1,389 crore respectively, which rose to Rs. 27984 crore, Rs. 12420 crore, Rs. 11615 crore, Rs. 1320 crore, Rs. 342 crore and Rs. 2,196 crore respectively as on 31.3.2009.
Major initiatives taken by the Ministry of Steel during the year
(i) Administrative and fiscal action to manage inflation in the steel sector
The Government took a number of fiscal and administrative steps to contain steel prices. The gist of fiscal measures taken during the year for achieving price stability were :
The Government took a number of fiscal and administrative steps to contain steel prices. The gist of fiscal measures taken during the year for achieving price stability were :
i) Central Value Added Tax (CENVAT) on steel items reduced from 14% to 10% with effect from 24.02.2009 ;
ii) Countervailing duty (CVD) on Thermo Mechanically Treated (TMT) bars and structural reintroduced with effect from 2.1.2009 ;
(ii) Meetings of Inter Ministerial Group (IMG) An Inter Ministerial Group (IMG) to monitor and coordinate various issues concerning major steel investments in the country has been constituted under the Chairmanship of Secretary (Steel) for conducting coordination meetings with the steel investors, concerned Central Ministries/Departments and the State Governments. A meeting of IMG was held on 25.8.2009. It was attended by all major PSUs and private steel investors and Ministries/Departments such as Railways, Shipping, Road Transport & Highways, Environment & Forest and Mines.
(iii) Survey to measure domestic steel consumption-• As the present per capita consumption in the country is only around 47 kg (2008) against the world average of 190 kg and that of 400 kg in developed countries, a study has been commissioned through the Joint Plant Commission (JPC) during the 2008, to estimate the per capital demands for iron and steel by the rural population and to determine the factors for its enhancement.
(iv) Mega Expansion Plans of SAIL, RINL & NMDC Ltd.
The Steel PSUs are in the midst of ambitious expansion plans. The major thrust of the modernization and expansion plans is to adopt the best modern technology, which in addition to being cost effective should also be energy efficient and environment friendly.
• The progress of the expansion of SAIL, RINL and NMDC is monitored on a regular basis in the Ministry. As a consequence of monitoring, a number of improvements have been put in place in project implementation.
• The expansion and modernization programme of SAIL is well underway at all its steel plants to
enhance the hot metal production capacity from the level 13.82 million tonne per annum to 23.46
million tonne per annum under its current phase. The current phase of expansion and modernization is expected to be completed by the financial year 2012-13 and as of now, project implementation is broadly on schedule for meeting this target. Out of the total investment on Modernization and Expansion, a provision of Rs. 10,356 crore has been made in the financial year 2009-10 and this investment target is expected to be fulfilled by the end of the financial year.
• In respect of RINL, expansion plan for increasing liquid steel capacity from 3.6 million tonnes to
6.3 million tonnes by 2010 is progressing as per schedule. Stage-I of the project would be completed by October, 2010 and Stage-II by September, 2011. Supply orders for all major packages have already been placed. In case of RINL, the expansion plan would increase its capacity from 3 million tonnes to 6.3 million tonnes of liquid steel production per annum by 2010
and 2011 in phases, at an estimated cost of around Rs.12,228 crore.
• The progress of activities in respect of Integrated Steel Plant (ISP) of NMDC is also well underway. The environmental clearance for Integrated Steel Plant of NMDC at Nagarnar was accorded by the Ministry of Environment and Forests (MoEF) on 15th September, 2009.
Chhattisgarh Government has sanctioned drawal of water for NMDC. NMDC is in the final stage of the process of shortlisting of the technology provider and the process is expected to be completed shortly.
(v) Steel Processing Units
• SAIL has planned to set up Steel Processing Units (SPUs) at various locations in Bihar (Bettiah, Mahnar, Gaya); Uttar Pradesh (Lakhimpur); Madhya Pradesh (Gwalior, Ujjain and Hosangabad);Himachal Pradesh (Kangra) ; Assam (Guwahati) and Jammu & Kashmir (Srinagar) to meet customers’ demand for supplying sized and finished steel near the point of consumption,
particularly in states where there are no steel plants and where steel consumption is low compared to the national average. Out of these units envisaged, foundation stones have been laid at nine sites (Bettiah, Mahnar, Gwalior, Ujjain, Hosangabad, Gaya, Lakhimpur, Kangra and Srinagar). The SPU at Bettiah is under implementation. For SPUs at the other locations, tendering activity for various packages is in progress.
particularly in states where there are no steel plants and where steel consumption is low compared to the national average. Out of these units envisaged, foundation stones have been laid at nine sites (Bettiah, Mahnar, Gwalior, Ujjain, Hosangabad, Gaya, Lakhimpur, Kangra and Srinagar). The SPU at Bettiah is under implementation. For SPUs at the other locations, tendering activity for various packages is in progress.
(vi) Merger/acquisitions/revival and restructuring of PSUs
Various proposals for merger of PSUs under the administrative control of Ministry of Steel are underway
• Government has approved merger of Sponge Iron India Limited (SIIL) with NMDC. The merger procedures and formalities at the corporate level of NMDC and SIIL have been completed. The final formalities at the level of the Ministry of Corporate Affairs are underway and it is expected that the merger notification would be issued shortly.
• BRL has finally been merged with SAIL w.e.f. 1.4.2007 (appointed date) by an order of the Ministry of Corporate Affairs (MCA) filed with Registrar of Companies (ROC) on 27.08.2009. BRL is now rechristened as ‘SAIL Refractory Unit’ (SRU).
• Draft Scheme of amalgamation with appointed date of merger as 1.4.2010 has been approved by the Ministry and has been filed on 7.12.2009 with the Stock Exchanges where SAIL and MEL are listed for their approval. Thereafter, the Scheme would be filed with the Ministry of Corporate Affairs for issue of the Order of Amalgamation. Efforts will be made to ensure that all the approvals are obtained in the next three months and the merger process completed by the end of June 2010. After the merger, a capital investment of Rs.250 crore is proposed to be made to enhance the capacity of the plant.
• The Cabinet has approved a restructuring plan for Bird Group of Companies (BGC). The restructuring proposal envisages converting under BGC into Public Sector Undertakings and vesting their management control to Rashtriya Ispat Nigam Limited (RINL), in a subsidiary cum holding structure in order to make these companies economically viable and sustainable. The Government loan and accrued interest thereon would be waived off. The commercially unviable companies would be would up and their employees would be adjusted in other sister companies under the Group or would be offered VRS .Implementation of the decision of Cabinet is underway.
• Restructuring of Hindustan Steelworks Construction Company Ltd. (HSCL)
• BRL has finally been merged with SAIL w.e.f. 1.4.2007 (appointed date) by an order of the Ministry of Corporate Affairs (MCA) filed with Registrar of Companies (ROC) on 27.08.2009. BRL is now rechristened as ‘SAIL Refractory Unit’ (SRU).
• Draft Scheme of amalgamation with appointed date of merger as 1.4.2010 has been approved by the Ministry and has been filed on 7.12.2009 with the Stock Exchanges where SAIL and MEL are listed for their approval. Thereafter, the Scheme would be filed with the Ministry of Corporate Affairs for issue of the Order of Amalgamation. Efforts will be made to ensure that all the approvals are obtained in the next three months and the merger process completed by the end of June 2010. After the merger, a capital investment of Rs.250 crore is proposed to be made to enhance the capacity of the plant.
• The Cabinet has approved a restructuring plan for Bird Group of Companies (BGC). The restructuring proposal envisages converting under BGC into Public Sector Undertakings and vesting their management control to Rashtriya Ispat Nigam Limited (RINL), in a subsidiary cum holding structure in order to make these companies economically viable and sustainable. The Government loan and accrued interest thereon would be waived off. The commercially unviable companies would be would up and their employees would be adjusted in other sister companies under the Group or would be offered VRS .Implementation of the decision of Cabinet is underway.
• Restructuring of Hindustan Steelworks Construction Company Ltd. (HSCL)
“HSCL, a Kolkata based company, was established in 1964. HSCL is engaged in the construction of integrated steel plants and other infrastructure development activities. The company has accumulated losses to the tune of Rs. 1379 crore due to heavy interest burden and excessive manpower in the past. However, the company has shown operational profits for the last several years. A revival/restructuring package is being evolved by the Government aiming at expediting the process of modernization of Steel Plants and infrastructure projects by HSCL. HSCL would be in a position to take up fresh infrastructure projects and earn profit after the implementation of the revival package. The Note for Cabinet Committee on Economic Affairs (CCEA) regarding restructuring has been prepared and circulated. However, there are some financial issues that have to be finally resolved with the Ministry of Finance, particularly regarding the waiver of grants and loans and the note will be taken to CCEA shortly thereafter.
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