DEMAND GENERATION FOR STEEL IN NEW MILLENNIUM
A. K. Agarwal*
The onset of liberalisation and economic reforms in the early 90s saw the largest ever decadal addition of about 12 million tonnes of steel production capacity in the country, most of which was in the private sector. India thus arrived on the global steel scenario and today it is the tenth largest producer of steel in the world. It has also emerged as a net exporter of steel. The sector provides direct employment to almost half a million people and has a cumulative capital base of Rs.90,000 crore. In addition to the growth in capacity and production, fresh investments also led to the creation of modern steel mills using state-of-the-art technology. Despite all these achievements, the rise in demand for steel has been the single major factor holding back the growth of the steel sector.
Steel consumption has also come under severe pressure due to competition from other materials such as aluminum, wood, plastics, cement and glass. Over a period of time, the transition in the structure of the Indian economy from a material- intensive primary or secondary economy to a service sector economy has led to lower demand for steel. With enhanced technology and improved design, the industry and consumers seek lightweight steel articles. This has also contributed to reduction in the volume of steel required for different applications.
Apart from these long-term reasons, the steel sector in the recent past, also had to face adverse demand conditions due to slowdown in the growth of end-using sectors of steel such as capital goods, transportation, consumer durables, automobiles and construction activities of all kinds. With greater liberalisation measures on the anvil, investment in infrastructure has been left to private capital and Government investments in this core sector have reduced. Influx of private capital has not yet materialised and the domestic demand for steel has failed to pick up. In addition, a steady increase in import of cheap steel also affected the sector adversely. The Government is, therefore, keen to enhance the demand for steel and overcome the bottlenecks, which are preventing the growth of steel demand.
The Ministrys vision statement 2020 has placed a high priority to treble the steel demand in the coming decades. The problem of demand stagnation has to be tackled at the natinal level by drawing up well-defined initiatives. Some of these would include penetrating vast rural markets where consumption of steel at present is at the lowest.
Superiority of steel as a generic material is being established for a wide range of applications both in the domestic sector as well as in the small and medium scale industry where the usage of steel is still limited. Steel intensive construction practices are being propagated all over the country which would include change in the curriculum of engineering and architectural colleges which still continue to have a pro-cement approach as compared to steel usage.
Above all, an initiative to develop steel as a consumer-friendly, environment-friendly and affordable alternative would have to be projected in the marketing strategies, both domestically and globally.
Studies have shown that the driving force for growth in demand for steel is no longer the GDP growth per se. The most appropriate accelerator for steel demand, under the current economic circumstances would be to boost the construction sector, as it is this sector alone which has the highest bearing on steel demand. With the Governments focus on bringing about a special thrust for the growth of the infrastructure sector in the economy today, particularly, the gold quadrilateral projects, Pradhan Mantri Gram Sadak Yojna, strengthening and expansion of ports and construction of mega power projects, the demand for steel is sure to grow in the coming decades.
The efforts being made both by producers of steel and the Government to generate additional demand of steel from different sectors will, indeed, start bearing fruit in the coming years. The National Steel policy, currently, under preparation, will be focussing on this issue specifically along with addressing other impediments to the growth of this key sector such as cost and availability of power, infrastructure and freight. The Indian steel industry is, thus, poised for bigger achievements in the coming years.