Steel plays an important role for the development of any country. The per capita consumption of steel is used as a yardstick to measure the socio-economic development level and the living standards of people in a country. Thus for any developing economy, ignoring this industry will come at one’s peril. Steel making in India dates back to 400 BC when Indian archers were recruited by the Greek army who used arrows tipped with steel. Through archaeological findings at Mesopotamia and Egypt it has been observed that the use of steel and iron was known to man for over 6000 years and some of the best products were manufactured in India.
In Delhi, an Iron pillar in the Qutub complex was made in the 7th century. It is an engineering marvel which has not rusted till date, baffling many scientists and researchers. At the Sun Temple in Konark, Orissa structures were made out of steel in the 13th century. India was flourishing in those times, but with the advent of foreign colonial rule, India’s prosperity gave way to poverty. The iron and steel industry languished due to the policy restrictions only allowing the supply of raw materials.
Dawn of a new era In 1830, Joshua Marshall Heath a foreigner set up a small steel plant at Porto Novo on the coast of Madras. The production rate at the plant was forty tonnes per week. His plant’s productivity levels were low as the production outcome was only one tonne of low quality pig iron for four tonnes of charcoal. He finally abandoned this venture as he was facing stiff competition from the British steel industry that had been able to achieve economies of scale.
In 1874, a notable attempt was made to revive the Indian steel industry when Bengal Iron Works (BIW) was established at Kutli, near Asansol in West Bengal. BIW helped in improving the process of iron and steel making as it used coke instead of charcoal as a fuel for production. But, the plant faced a crisis of funds and it was then that the Bengal government took over the plant rechristened it as Barakar Iron Works which was then followed by an acquisition by the Bengal Iron and Steel Company in 1889 from where it became a success story.
Its production output of pig iron became 40,000 tonnes in 1900 which was continued on till 1936 when it was taken over by Indian Iron and Steel Company (IISCO). On 27th August 1907, modern India’s first major iron and steel organization, Tata Iron and Steel Company (TISCO) was formed in Mumbai by Jamsetji Nusserwanji Tata to produce 160,000 tonnes of pig iron. Their 1st plant for iron and steel production was started at Sakchi (present Jamshedpur) in Jharkhand in late 1908 and the plant rolled out its first steel ingot in February 1912.
Though the plant and its development was disfavored by the British rulers, with the advent of World War I, the demand for iron and steel rose tremendously, and due to nationalist pressure the industry was saved. In 1918, IISCO was formed which started producing pig iron at Burnpur, West Bengal in 1922. Meanwhile liquidation of BIW occurred and it merged with IISCO. The Steel Corporation of Bengal (SCOB) formed in 1937 started making steel at Asansol, West Bengal and later merged with IISCO. The TISCO plant meanwhile had a drastic capacity expansion with the plant capacity reaching 1,000,000 tonnes by 1947.
According to Jawaharlal Nehru, India’s first Prime Minister, “(the Tatas) laid the foundation of heavy industries in India”. Post Independence In 1948, under the first Industrial Policy Resolution adopted by the constituent assembly a principle of mixed economy was accepted wherein industries were divided into various categories. The government exclusively started building new units in the public sector, without disturbing the existing ones in the private sector as there wasn’t enough steel being produced to meet the nation’s demand.
Thus, the development of the basic steel industry was handled by the government whereas the private sector reaped the benefits through the creation of downstream units which provided inputs in the form of pig iron, blooms and flat products which were produced by the public sector. The first of these public sector plants was set up at Rourkela, Orissa. This was followed by plants at Bhilai in Madhya Pradesh, Durgapur in West Bengal, Bokaro in Jharkhand and Visakhapatnam in Andhra Pradesh in that order. Amongst the private sector steel plants like Alloy Steel Plant, Kalinga Iron Works, Jindal Vijaynagar Steel Ltd.
, Malavika Steel Ltd. and Salem Steel Plant came into existence during this period. In 1955 TISCO launched its Two million tonnes steel ingots plan which was achieved in December 1958. The government also put restrictions in the form of control over distribution of steel and putting a price control and levying import tariffs. In 1964, a Joint Plant Committee (JPC) was formed under the Iron and Steel Control Order to determine the prices of different steel products. In 1972, a dual pricing structure was introduced in the industry to help improve the impeded growth in the industry.
However this was reviewed in 1982, as producers were using cheap semi-finished products for producing final products that could be sold at free market prices. In 1991, a new industrial policy was announced for the iron and steel industry, which among others industries, was reserved for the public sector and was given an exemption from the provision of compulsory licensing. In 1992, the iron and steel industry was included in the list of ‘high priority’ industry for automatic approval for foreign equity upto 51% (now 74%).
Also, the import duties on various finished and semi-finished steel products were reduced by 20%. The effect of these policies was seen in the amount of finished steel produced which went from 1. 1 million tonnes in 1950-51 to 23. 37 million tonnes in 1997-98. In the past few years there has been a resurgent growth of the production of iron and steel in India, with it becoming the 5th largest producer of crude steel in the world (Table 1). Since, India is not able to meet its demand for steel (Table 2) the free import of iron and steel as per the extant policy has been implemented by the government.
Another heartening fact has been the competitiveness of the Indian steel in the global market. According to World Steel Dynamics, the total cost of steel production per metric tonne in the USA, Japan, Germany and India (in USD) is 510, 550, 557 and 497 respectively. Thus, the Indian steel can expect a good market in the world through its efficient production. Table 1: Production of Iron and Steel in India (Source: Joint Plant Committee) Category | 2004-05| 2005-06| 2006-07| 2007-08| 2008-09| Pig Iron (in million tonnes)| 3. 228| 4.
695| 4. 993| 5. 314| 5. 289| Finished Carbon Steel (in million tonnes)| 40. 055| 44. 544| 55. 416| 58. 233| 59. 02| Table 2: Import of Finished Carbon Steel in India (Source: Joint Plant Committee) Year| 2004-05| 2005-06| 2006-07 (estimated)| 2007-08| 2008-09(estimated)| Quantity in million tonnes| 2. 109| 3. 850| 4. 436| 6. 581| 5. 149| Sources: 1. http://steel. nic. in/overview. htm 2. http://ies. lbl. gov/iespubs/41844. pdf 3. http://pib. nic. in/feature/feyr2000/fmar2000/f060320002. html 4. http://www. tatasteel100. com