India sets eyes on becoming 2nd largest steel maker by 2012

India has chalked out an ambitious plan to more than double its current capacity of steel output of 57 million tonnes to become the second largest producer in the world as part of its overall thrust on infrastructure development.

The mandate has come from Steel Minister Virbhadra Singh, even as a major effort is also on to map the rich mineral resources of the country into a database to help prospect raw materials not just for the steel sector but also other industries.

\”I have set a target of 124 million tonnes by 2012. Yes, we will then become the world\’s second largest steel producer. But, more importantly, India has a vast capacity to consume that kind of output. It is necessary for our infrastructure development,\” the minister said.

\”Here I am only talking about capacity expansion of existing steel companies. If I also take greenfield projects into account, we have expression of interest for projects worth over $80 billion,\” Singh said in an interview.

At present China is the largest steel maker in the world with a capacity of over 600 million tonnes, followed by Japan and South Korea. India ranks fourth.

The minister said the present per capita consumption of steel in India was only around 47 kg against the world average of 190 kg and 400 kg in developed countries. \”This reflects the scope India has.\”

That\’s the reason why, he added, as many as 222 pacts by domestic and overseas investors have been signed in recent years with various states for setting up units to produce additional 276 million tonnes of steel in the country.

Major investment plans are in the states of Orissa, Jharkhand, Karnataka, Chhattisgarh and West Bengal.

Under the National Steel Policy of 2005, India has projected an annual steel consumption growth of seven percent and production of 110 million tonnes of crude steel by 2019-20.

\”But going by existing trends these estimates are likely to be exceeded. Demand would grow at more than 10 percent.\”

Singh said the federal government was also pushing for some large projects of global companies, including the $12 billion steel unit of South Korea\’s Posco proposed in Orissa a few years ago -touted as the largest foreign direct investment proposal in India.

This apart, there are two similar proposals that came later from Arcelor-Mittal - which is controlled by India- born and London-based tycoon Lakshmi Niwas Mittal - in Orissa and Chhattisgarh with similar capacities.

\”There are some genuine issues like acquisition of land and, that too, tribal land, allocation of mines and rehabilitation of people. These are being sorted out. The companies have my assurance that the government of India will be an active facilitator,\” said the minister.

A five-term chief minister of the hill state of Himachal Pradesh, the veteran Congress party leader said the state-run Steel Authority of India Limited (SAIL) alone has targeted to virtually double its capacity to nearly 30 million tonnes.

\”These expansion projects will sail through. Both at Bokaro and Bhilai, the company has enough land to take up the projects,\” said Singh, an alumnus of the prestigious Bishop Cotton School at the hill resort of Shimla in his home state and St. Stephens College in the national capital.

Even the private steel makers are gung ho on the prospects of the Indian steel industry, including the largest player in the private sector, Tata Steel, established over a century ago in 1907.

\”We have recently been producing at beyond our new capacity level and are well placed to take advantage of the growth in Indian steel demand, which this year is predicted to be very robust at eight percent,\” said Tata Steel\’s managing director Hemant Nerurkar.

The company has entered into a pact with Japan\’s Nippon Steel Corp for a 600,000 tonne per annum unit at Jamshedpur in Jharkhand to specifically make products for the auto industry.

According to the steel minister, SAIL will also go for a follow-up public issue and partial divestment of government equity during the early part of next fiscal and a decision has already been taken in this regard.

\”We have plans for 10 percent offer. Half of that will be in the form of government\’s own equity and go back to the government. The other half will be in fresh equity offer and this will go to SAIL,\” the minister explained.

\”We have a target of Rs.16,000 crore ($3.2 billion), of which 50 percent will go to the exchequer.\”

The veteran minister said another company under his ministry\’s administrative control - National Mineral Development Corp (NMDC) - will also go for divestment soon and 8.3 percent shares will be on offer.

\”We propose to raise Rs.13,000 crore ($2.6 billion) from this NMDC equity sale. But all of it will go to the government,\” he said, adding that there were 11 public sector undertakings within the administrative control of the steel ministry.