From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Paper 3- Issues faced by steel industry
The steel industry forms the backbone of the economy. This article highlights the difficulties of the industry magnified the pandemic. Ans suggest ways to revive demand.
BAT could help
- Introduction of a Border Adjustment Tax, known as BAT could help India’s steel industry.
- Many countries use BAT to protect local steel manufacturers.
- With economic pain unleashed by the pandemic and threat posed by Chinese state-subsidised steel imports, India hardly affords not to BAT.
- BAT would create a level playing field.
Why Indian steel industry is non-competitive
- Indian steel manufacturers bear multiple local taxes – electricity and cross-subsidy duties, clean energy cess and royalties on ore and there are more.
- These taxes make up 12% of the price of steel.
- In rival markets, these levies either do not exist or are comparatively lower.
- So Indian steel is non-competitive even before it leaves our plants.
Impact of Covid
- Impact of Covid on India’s biggest steel mills, which make up 65% of the country’s annual output of about 110 MT, was calamitous.
- During the pandemic, the mills’ massive blast furnaces continued to burn.
- Closure and reopening of furnaces can take up to 12 weeks; the process is complex, and maintenance costs are high.
- So, the furnaces were burning during the lockdown.
- India’s mills have continued to bear high fixed costs: firing furnaces but without making much steel.
- Because of this, smaller mills, which account for about a third of national output, lack the strengths to survive a trough, and many have capitulated.
Significance of Steel Industry
- Steel is front and centre in India’s recovery.
- The industry rests on mutual support – investment is made by entrepreneurs, the government offers supportive policies.
- Government will lend weight to India’s competitive and comparative advantages, especially in manufacturing, in a post covid-19 economic order.
- Indian steel’s guiding light is a steel ministry vision of 300MT of capacity by 2030, currently at about 138 MT.
- The pandemic will put pressure on this target.
Short term hurdles faced by Steel industry
- Government capital expenditure is diverted to public health.
- Real estate builders have an interest in large scale construction.
- Car manufacturing will not see upturn until the second half of the year.
- The pandemic has also hurt demand for capital utilisation, weighing heavily on capex.
How the demand can be improved
- Steel needs more infrastructure projects. Also, the fillip would be for the government to pay on time. Expedite the work.
- An initiative to consign old cars to the scrap heap would significantly lift demand for steel to build replacement cars.
- Improving the logistics chain would help transport finished goods and materials more quickly and less expensively.
- Make steel the material of choice in the construction of flyovers, roads bridges and crash barriers, improving their safety, durability and, as a result, their life-cycle cost.
- Indian mills possess world-class infrastructure and capacities and have integrated backwards by acquiring mining rights, partly to mitigate costs. As mentioned, one is high taxes on input materials such as energy.
Consider the question “Examine the issues Indian steel industry faces. Suggest the ways to make it more competitive.”
A revived economy means a revived steel industry. The government should provide the wider and deeper support to the government to bring this vital sector back on the track and make help achieve global competitiveness.
From UPSC perspective, the following things are important :
Prelims level : Steel scrap
Mains level : Steel production and associated factors
- Ministry of Steel has issued the Steel Scrap Recycling Policy.
Steel Scrap Recycling Policy
- This will ensure scientific processing & recycling of ferrous scrap generated from various sources and a variety of products.
- The policy framework shall provide standard guidelines for collection, dismantling and shredding activities in an organized, safe and environmentally sound manner.
- The policy aims to achieve the following objectives –
- To promote circular economy in the steel sector.
- To promote a formal and scientific collection, dismantling and processing activities for end of life products that are sources of recyclable (ferrous, non- ferrous and other non-metallic) scraps.
- It will lead to resource conservation and energy savings and setting up of an environmentally sound management system for handling ferrous scrap.
- Processing and recycling of products in an organized, safe and environment friendly manner.
- To evolve a responsive ecosystem by involving all stakeholders.
- To produce high quality ferrous scrap for quality steel production thus minimizing the dependency on imports.
- To decongest the Indian cities from ELVs and reuse of ferrous scrap.
- To promote 6Rs principles of Reduce, Reuse, Recycle, Recover, Redesign and Remanufacture through scientific handling, processing and disposal of all types of recyclable scraps including non-ferrous scraps, through authorized centers / facility.
- Steel is a material most conducive for circular economy as it can be used, reused and recycled infinitely.
- While iron ore remains the primary source of steel making, used or re-used steel in the form of Scrap is the secondary raw material for the steel industry.
- Indian steel industry is characterized by the presence of a large number of small steel producers who utilize scrap with other inputs for steel making.
Why focus on scrap steel?
- The availability of scrap is a major issue in India and in 2017 the deficit was to the tune of 7 million Tons.
- This was imported at the cost of more than Rs. 24,500 crores (approx.) in 2017-18.
- The gap between demand and supply is can be reduced in the future and the country may be self-sufficient by 2030.
- The scrap has to be channelized so that the same can be utilized for steel production in an environmentally friendly manner.
Commercial significance of scrap
- Scrap is an important input for the electric furnaces.
- If quality scrap is provided as the charge to the electric furnaces, then the furnaces can produce high grade steel.
- High Grade Steel Scrap shall not have the impurities if processing is done with the scrap processing centres and by shredders etc.
- The high-grade steel scrap shall be recycled to produce high grade steel again, to be used in the industries such as equipment manufacturing, automobiles and other downstream industries.
- Scrap with less or no impurities shall result in better long products that are commonly used in the construction industry and is common use steels.
- If better-processed scrap is produced in the country, it shall result in not only import substitution of scrap but also import substitution of high-end steel that is currently imported in the country.
- Scrap based steel making technologies have been envisaged as one of the important options to reduce GHG emission intensity.
- This shall also contribute in adopting the principle of 6Rs i.e. Reduce, Reuse, Recycle, Recover, Redesign and Remanufacture to avoid any adverse impact on the environment.
- There is a worldwide trend to increase steel production using scrap as the main raw material as recycling of scrap helps in conservation of vital natural resources besides other numerous benefits.