Steel Industry in India is on an upswing because of the strong global and domestic demand. India's rapid economic growth and soaring demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put Indian steel industry on the global map. According to the latest report by International Iron and Steel Institute (IISI), India is the seventh largest steel producer in the world.

The origin of the modern Indian steel industry can be traced back to 1953 when a contract for the construction of an integrated steelworks in Rourkela, Orissa was signed between the Indian government and the German companies Fried Krupp und Demag AG. The initial plan was an annual capacity of 500,000 tonnes, but this was subsequently raised to 1 million tonnes. The capacity of Rourkela Steel Plant (RSP), which belongs to the SAIL (Steel Authority of India Ltd.) group, is presently about 2 million tonnes. At a very early stage the former USSR and a British consortium also showed an interest in establishing a modern steel industry in India. This resulted in the Soviet-aided building of a steel mill with a capacity of 1 million tonnes in Bhilai and the British-backed construction in Durgapur of a foundry which also has a million tonne capacity.

The Indian steel industry is organized in three categories i.e., main producers, other major producers and the secondary producers. The main producers and other major producers have integrated steel making facility with plant capacities over 0.5 mT and utilize iron ore and coal/gas for production of steel. The main producers are Tata Steel, SAIL, and RINL, while the other major producers are ESSAR, ISPAT and JVSL. The secondary sector is dispersed and consists of: (1) Backward linkage from about 120 sponge iron producers that use iron ore and non-coking coal, providing feedstock for steel producers; (2) Approximately 650 mini blast furnaces, electric arc furnaces, induction furnaces and energy optimizing furnaces that use iron ore, sponge iron and melting scrap to produce steel; and (3) Forward linkage with about 1,200 re-rollers that roll out semis into finished steel products for consumer use.

Structural Weaknesses of Indian Steel Industry

• Although India has modernised its steelmaking considerably, however, nearly 6% of its crude steel is still produced using the outdated open-hearth process.
• Labour productivity in India is still very low. According to an estimate crude steel output at the biggest Indian steelmaker is roughly 144 tonnes per worker per year, whereas in Western Europe the figure is around 600 tonnes.
• India has to do a lot of catching in the production of stainless steel, which is primarily required by the plant and equipment, pharmaceutical and chemical industries.
• Steel production in India is also hampered by power shortages.
• India is deficient in raw materials required by the steel industry. Iron ore deposits are finite and there are problems in mining sufficient amounts of it. India's hard coal deposits are of low quality.
• Insufficient freight capacity and transport infrastructure impediments too hamper the growth of Indian steel industry.

• Low labour wage rates
• Abundance of quality manpower
• Mature production base
• Positive stimuli from construction industry
• Booming automobile industry

Outlook
The outlook for Indian steel industry is very bright. India's lower wages and favourable energy prices will continue to promise substantial cost advantages compared to production facilities in (Western) Europe or the US. It is also expected that steel industry will undergo a process of consolidation since industry players are engaged in an unfettered rush for scale. This is evident from the recent acquisition of Corus by Tata. The deployment of modern production systems is also enabling Indian steel companies to improve the quality of their steel products and thus enhance their export prospects.

Note: The above information was last updated on 21-07-2007