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IRON AND STEEL INDUSTRY IN INDIA - PAST, PRESENT AND FUTURE

Sunit Ghosh*

    The history of steel-making in India can be traced back to 400 BC when the Greek emperors used to recruit Indian archers for their army who used arrows tipped with steel. Many more evidences are there of Indians’ perfect knowledge of steel-making long before the advent of Christ. Archaeological finds in Mesopotamia and Egypt testify to the fact that use of iron and steel was known to mankind for more than six thousand years and that some of the best products were made in India. Among the widely-known relics is the Iron Pillar near Qutab Minar in Delhi. The pillar, built between 350 and 380 AD, did not rust so far -----an engineering marvel that baffles the scientists even today. Yet another engineering feat is the famous Sun Temple at Konark in Orissa, built around 1200 AD, where steel structurals were used for the first time in the world.

    These were the halcyon days when India flourished in all directions and when its prosperity was a matter of envy for the foreigners. But as ill luck would have it, India’s prosperity gave way to poverty after the advent of the foreign rule. India’s indigenous industry languished because of a deliberate policy of the colonial rulers to make the country only a supplier of raw materials.

    Steel Role plays a vital role in the development of any modern economy. The per capita consumption of steel is generally accepted as a yardstick to measure the level of socio-economic development and living standards of the people. As such, no developing country can afford to ignore the steel industry.

Beginnings

    The first notable attempt to revive steel industry in India was made in 1874 when the Bengal Iron Works (BIW) came into being at Kulti, near Asansol in West Bengal. However, forty-four years before that, in 1830 to be precise, a foreigner, named Joshua Marshall Heath, had set up a small plant at Porto Novo on Madras Coast. Heath produced in his plant pig iron at the rate of forty tonnes a week. His method of iron-making needed approximately four tonnes of charcoal to produce one tonne of low quality pig iron which proved to be too expensive for Heath to carry on in the face of stiff competition from the British steel industry. The BIW made considerable improvement in the process of iron and steel making. It used coke as the fuel instead of charcoal. But the plant fell sick as the source of funds dried up. It was taken over by the Bengal Government and was rechristened as Barakar Iron Works. In 1889 the Bengal Iron and Steel Company acquired the plant and by the turn of the century the Kulti plant became a success story. It produced 40,000 tonnes of pig iron in 1900 and continued to produce the metal until it was taken over by Indian Iron and Steel Company (IISCO) in 1936.

    For modern India’s iron and steel industry August 27, 1907 was a red-letter day when the Tata Iron and Steel Company (TISCO) was formed as a Swadeshi venture to produce 120,000 tonnes of pig iron. The TISCO plant at Sakchi (renamed Jamshedpur) in Bihar, started pig iron production in December 1908 and rolled out its first steel the following year. TISCO had expanded its production capacity to one million tonnes ingot by the time the country achieved freedom. The Tatas, as Gandhiji said, represented the "spirit of adventure" and Jamsetji Tata, in the words of Jawaharlal Nehru," laid the foundation of heavy industries in India". The British rulers disfavoured this and other attempts to start indigenous industry. It was chiefly with the help of American experts that the Tatas started their industry. Its childhood was precarious but the war of 1914-18 gave it a fillip. Again it languished and was in danger of passing into the hands of British debenture holders. But nationalist pressure saved it. In 1918, soon after the war, Indian Iron and Steel Company (IISCO) was formed. The then Mysore government also decided to start an iron works at Bhadravati. While IISCO started producing pig iron at Burnpur in 1922, the Mysore Iron and Steel Works took about 18 years to start its plant. Meanwhile, the Bengal Iron Works went into liquidation and merged with IISCO. The Steel Corporation of Bengal (SCOB) formed in 1937, started making steel in its Asansol plant. Later in 1953, SCOB merged with IISCO.

    Prime Minister Nehru firmly believed that "no country can be jpolitically and economically independent unless it is highly industrialised and has developed its resources to the utmost". Nehru’s ideas about India’s development were broadly incorporated in free India’s first Industrial Policy Resolution adopted by the Contituent Assembly in 1948. The resolution officially accepted the principle of mixed economy. Industries were divided into four categories. In the first category were strategic industries which were made the monopoly of the Government. In the second category were six industries which included, among others, coal, iron and steel.

    It was decided that new units would be started exclusively by the government in the public sector without disturbing the existing ones in the private sector. Eighteen industries, including heavy castings and forings of iron and steel, ferro alloys and tool steel were covered by the third category and the rest of the industries by the fourth. In sum, the government committed itself to the development of basic steel industry while the private sector was to benefit through the establishment of downstream units which would use pig iron, billets, blooms and flat products to be made by the public sector steel plants.

    In keeping with the spirit of the resolution the Government decided to start a chain of steel plants all over the country in the public sector. The first such plant was set up at Rourkela in Orissa. The second came up at Bhilai in Madhya Pradesh. It was followed by a third at Durgapur in West Bengal. Each of these three plants had an initial production capacity of one million tonne ingot. Durgapur was followed by a steel plant at Bokaro in Bihar. The onward march of Indian steel did not stop at Bokaro. The fifth public sector steel plant was set up at Visakhapatnam in andhra Pradesh. As a matter of fact, the country was dotted with steel and steel-related plants in public and private sectors, like Alloy Steel Plant, Salem Steel Plant, Kalinga Iron Works, Malavika Steel Ltd., Jindal Vijaynagar Steel Ltd., to name only a few. About the same time TISCO launched its two-million-tonne expansion programme.

    The Government’s Industrial Policy had undergone changes ____ once in 1956 and then in 1991. The resolution modified in 1956 brought changes in the category pattern and listed more industries for the public sector than did the earlier one, though it was not harsher towards the private enterprise. In the new industrial policy announced in 1991 iron and steel industry, among others, was included in the list of industries reserved for the public sector and exempted from the provision of compulsory licensing. With effect from May 24, 1992 iron and steel industry was included in the list of ‘high priority’ industry for automatic approval for foreign equity upto 51% (now 74%). Export-import regime for iron and steel has also undergone major liberalisation. The freight equalisation scheme was withdrawn removing freight disadvantage to States located near steel plants.

    The new policy has already borne fruit. The finished steel pdroduction in India has gone up from mere 1.1 million tonnes in 1951 to 23.37 million tonnes in 1997-98 despite overall economic slow-down in the country.

    It has been estimated that the demand for finished steel in 2001-02 would touch 38.68 million tonnes and the projected availability of 38.01 tonnes is almost adequate to meet the domestic demand along with export of six million tonnes. Similarly, by 2006-07, the final year of the tenth plan, the demand for finished steel would be around 48.80 million tonnes, providing adequate surplus for meeting the projected export potential of nine million tonnes.

    However, there is hardly any scope for complacence over the fact that India continues to be the 10th largest steel producer in the world. In 1997 India’s per capita steel consumption was only 22 kg which was much below the world average of about 126 kgs. Even if the domestic demand grows up from 34.5 million tonnes to 100 million tonnes in 2025 the industry is unlikely to catch up with the production in the developed countries.

    The redeeming feature is the cost competitiveness of Indian steel in the global market. According to World Steel Dynamics, the total cost of steel production in the USA is $510 per metric tonne while in Japan it is $550, in Germany $557, in Canada $493 and in India it is $497. This is because of high material cost due to high excise and import duties. Reduction of cost on these accounts will make Indian steel more competitive in the world market. Indian steel can reasonably expect a good market in the neighbouring countries now that the Asian economy is looking up.

    In conclusion, it can be said with a certain measure of confidence that India’s iron and steel industry which had a glorious past and has an uncertain present may now look forward to a bright future.