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Hard Times for Steel Sector

Published: 31st December 2015 05:51 AM  |   Last Updated: 31st December 2015 05:51 AM   |  A+A-

Business reforms undertaken by Odisha Government for ‘Ease of Doing Business’ has no doubt got the appreciation of Prime Minister Narendra Modi, but all is not well for mineral-based industries in the State.

Even as steel industries are facing acute shortage of raw materials, the State Government has not been able to tackle the problem by augmenting mineral production.

Major industry players including Jindal Steel and Power Limited (JSPL), Essar Steel, Bhusan Steel and aluminium major Vedanta Resources have been drawing the attention of the State Government time and again to address the raw material issue, but nothing tangible has happened so far.

While steel plants are unable to utilise their installed capacities due to severe raw material constraints, the high cost of iron ore charged by the State-run Odisha Mining Corporation (OMC) and merchant miners have further compounded the problem.

The global slowdown and lack of demand for steel products due to negligible infrastructure development activities have heavily impacted the steel industries.

“The year 2015 has been a difficult year for mining and metal industries. Neither there is major public expenditure nor any private investment is forthcoming in core sectors such as infrastructure. Moreover, Chinese steel is being dumped in India at cheap prices making Indian steel uncompetitive,” said Prabodh Mohanty, secretary of East Zone Miners’ Association.

Claiming that huge quantity of iron ores are stocked in the mine-heads, Mohanty said even if iron ore prices have gone down by almost 60 per cent, there are no takers as most of the sponge iron units and pellet plants are closed. They do not have funds to procure iron ore even at lower prices, he added.

Steel makers, who have invested substantially in the State after the promise of the Government to provide raw material linkage, have been demanding a level playing field in the changed scenario.

“The MoU-signed steel industries, which have been gone into production, should be given priority during auction of iron ore blocks as per the new Mines and Mineral (Development and Regulation) MMDR Act, 2015,” said Manish Kharbanda, JSPL’s executive director and business head for mines and minerals.

Availability of cheap raw material was the major attraction for those who have invested in the State in steel sector. This is despite the fact that internal logistics is very expensive for steel makers due to serious constraints in transportation and port facilities. But all of a sudden everything changed with a change in policy. Such a thing never happened with the change in Government anywhere in the world, Kharbanda remarked.

Closure of a large number of sponge iron and pellet units had its adverse effect both on economy and employment. More than 50,000 people were rendered jobless after closure of mines which were running without statutory clearances. An equal number of people engaged in the sponge iron units was hit by their closure.

Stating that the slump in steel market is the direct effect of global recession, noted industrialist and CMD of Suryo Udyog Limited Amarendra Dash said the Government has a major role to play in regulating iron ore price.

“Unless the domestic players get a level playing field, they would not be able to compete with China which is dumping steel at much lower price,” Dash said.

“We are taking necessary steps to ensure availability of adequate raw materials for industries and meet the revenue target from mining sector for the current fiscal,” Minister of State for Steel and Mines Prafulla Mallick told this paper.

The notable achievement in 2015 was the commissioning of Tata’s Kalinganagar greenfield steel plant of three million tonne (MT) capacity.

Tata has planned to ramp up production to six MT by 2020 and 12 MT by 2025.

The State Government has signed memoranda of understandings (MoUs) with 92 companies in the last 15 years with a committed investment of `8 lakh crore while only 41 industries have started partial production so far. Out of the projects, 35 steel plants, three power plants, one each in aluminium, cement and auto-ancillary have started partial production, sources in the Industries Department said.

As far as steel is concerned, the agreements envisage a production capacity of 79.82 million tonnes of which about 15 million tonnes have been realised, the sources said.

While the project proposal of Korean steel major Posco for its 8 million tonne capacity plant in Jagatsingpur district remains uncertain, raw material crisis continues to hit the alumina refinery of Vedanta’s Lanjigarh plant in Kalahandi district.

Notwithstanding these problems, the World Bank has recognised Odisha as one of the most investment-friendly destinations of the country because of the positive attitude of the State Government towards industries.



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