A preliminary survey on the development

of the Indian steel industry after the

economic liberalisation

Hajime SATO
Institute of Developing Economies

1
 Overview
• Crude Steel Production in India in 2004 was
32.6 million tonnes, the ninth largest in the
world.
• The steel industry in the total manufacturing
;
– 10% in the value added (fluctuating)
– 8% in the employment but decreasing to 6%
after 1991
2
 Features of the Indian steel
Industry
• Abundant supplies of raw materials
• Integrated plants located inland
• Development designated to public sector up
to 1991
• Highly regulated and protected markets till
1991
• Relatively slow technological up gradation
3
 Brief history
• Before 1945, iron making developed, steel making
weak
• After independence, strong state initiatives and con
trols (IPA)
– IDRA (industrial licenses for entry, expansions etc.)
• Succeeded in installing integrated plants(Bhilai, R
ourkela, Durgapur) in the early 1960s. The three e
xpanded and Bokaro and VSP added in 70s and 80
s. But after all, stagnated from the mid-1960s to 19
90.
4
 Policy Changes
• Industrial and Trade Policy Resolutions in 1991 w
ith regard to the Steel industry
– Exempted from industrial license system
– Abolition of price controls
– Liberalising conditions for FDIs
– Liberalisation of imports and exports
– Lowering tariff level
• In short, steel companies compete more freely in d
omestic and international markets than before
5
 Changes in Technology
• Steel making process
• Iron making ：　 Rise of DRI(HBI/sponge
iron) production
• Steel making ：　 Replacement of OHF with
BOF/EAF, Introduction of CC 　
• Rolling ：　 Introduction of flat making
capacity(hot strip mill, cold rolling lines)
• Labour Productivity ：　 increasing
6
 Structural Changes
• Public v. Private ：　 New entry of private
firms
• Integrated v. non-integrated: New types of
integrated makers, EAF-Rolling makers,
Iron makers, Small EIF makers
• Dual structure efficient? Integrated and big
EAF makers v. Small EAF and EIF makers

7
 Consumption and Trade
• Apparent consumption per head extremely low
• Relative increase of flat products consumption
domestically
• Imports stable up to 2003, hot rolled coils
decreasing while hot rolled sheets increasing
• Exports increasing, not least hot rolled coils
• Exporters ： The share of SAIL, RINL and TISCO
decreasing, new comers exporting.

8
 Conclusion
Changes after the economic Problems faced
liberalisation
• Raw materials
• Steel production and
export increased much • Infrastructure
faster than before • Labour
• This increase attributable
to new comers • Environment
• Technology catching up • Finance
rapidly
• New type of steel firms
appeared
• Flat products imported
and exported
9
Table 1. Cr u de Steel Pr oduction (Top t en coun t r ies in 2004, m illion t on n es)
1975 1980 1985 1990 1995 2000 2004

USSR 141.3 147.9 154.7 154.4 - - -

China 23.9 37.1 46.8 66.3 95.4 127.2 280.5

Japan 102.3 111.4 105.3 110.3 101.6 106.4 112.7

US 105.8 101.5 80.1 89.7 95.2 101.8 99.7

Russia - - - - 51.6 59.1 65.6

South Korea 2.0 8.6 13.5 23.1 36.8 43.1 47.5
Germany 40.4 43.8 40.5 38.4 42.1 46.4 46.4
Ukraine - - - - 22.3 31.8 38.7
Brazil 8.4 15.3 20.5 20.6 25.1 27.9 32.9
India 8.0 9.5 11.9 15.0 22.0 26.9 32.6
Italy 21.9 26.5 23.9 25.5 27.8 26.8 28.6

World 643.4 716.1 718.9 770.5 750.2 847.4 1068.6

Sou rce: In t ern at ion al Ir on an d St eel In st it u te (IISI), St eel Sta t ist ical Year book, var iou s
issu es

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10
F igu re 1. Sh ar e of t h e st eel in du str y in t ot a l m an u factu r in g sector (1963 -2002, %)

16.0

14.0

12.0

10.0

8.0

6.0

4.0

2.0

0.0

963 965 967 969 971 973 975 977 979 981 983 985 987 989 991 993 995 997 999 001
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2

Number of employees Value added

Sou rce: UNIDO (2006), In du st r ia l St at ist ics Da t a base INDSTAT3 11

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図２ インドの粗鋼生産（1948 年から 2002 年）(1000 トン)

30000

25000

20000

15000

10000

5000

出所：IISI, St eel St a t ist ica l Yea r book. va r iou s issu es

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12
 Direct Reduction Process
Iron ore

Scrap Sponge
Iron
Blast furnace

EAF/EIF OHF/BOF

Continuous caster
Ingots

Bllets/ Slabs
Blooms

Hot strip mill/

Plate mill

Bar mill Surface Cold strip mill Pipemill/ Tube mill

treatment Line

Long Surface Plates, Hot

Cold rolled Pipes
products treatment
plate
coils and
rolled coils
and sheets
and back
sheet Tubes 13
Ta ble 2. P r odu ct ion of Direct Redu ced Ir on (1000 t on n es)
India World India's share in the world (%)

1985 102 11171 0.9

1991 1153 19607 5.9
1995 4267 31151 13.7
2000 5498 42525 12.9
2005 10635 55365 19.2

Average growth rate per annum (%)

1985-2005 26.2 8.3
1991-2005 16.0 7.2

Sou r ce: IISI, St eel St a t ist ica l Yea r book, va r iou s issu es

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14
Table 3. Steel pr oduct ion by process (% tota l cr u de st eel)
India South Korea Japan
OHF BOF EF OHF BOF EF OHF BOF EF

1980 59.0 20.0 21.0 1.2 69.2 29.7 0.0 75.5 24.5
1985 41.3 33.2 25.5 0.0 68.6 31.4 0.0 71.0 29.0
1990 31.3 41.3 27.5 0.0 68.9 31.1 0.0 68.6 31.4
1995 18.7 51.3 30.0 0.0 62.2 37.8 0.0 67.7 32.3
2000 9.3 49.8 40.9 0.0 57.2 42.8 0.0 71.2 28.8
2004 5.6 50.6 43.8 0.0 56.1 43.9 0.0 73.6 26.4

Sour ce: IISI, St eel Sta tist ica l Yea r book, var iou s issu es

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15
Table 4. Pr odu ct ion of Con tin u ou sly-ca st st eel (1975- 2004, % t ot al cr u de st eel)
India South Korea Japan World

1975 - 19.7 31.1 14.2

1980 - 32.4 59.5 30.0
1985 4.1 63.3 91.1 46.3
1990 12.3 96.1 93.9 59.1
1995 37.6 98.2 95.8 75.9
2000 60.9 98.6 97.3 86.5
2004 65.9 98.3 97.8 90.0

Sou rce: IISI, St eel St at ist ica l Yea r book, va r iou s issu es

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F igu re 4. Tr en d of long a n d fla t st eel pr oduct s (1995-2005, 1000t on n es)

30000

25000

20000

15000

10000

5000

0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Long products Flat products

Sou rce: IISI, St eel St at ist ica l Year book, va riou s issu es
back
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Table 5. Ch a n ges in em ploymen t an d la bou r pr odu ct ivity (ma jor pr oducer s
1990/91-2003/04)
1990-91 1994-95 1997-98 1999-2000 2001-02 2003-04

Numbers of employees at the end of financial year

SAIL 236079 228428 209815 185625 171065 149742
VSP 14433 14001 17354 17254 17026 16755
TISCO 44383 44736 35038 27735 23937 21203

Labour productivity (crude steel (tonnes) per man year)

Bhilai 98 121 132 121 137 179
Bokaro 87 108 109 105 116 136
Durgapur 45 49 71 88 108 131
Rourkela 56 53 46 55 67 84
IISCO 24 30 31 33 39 36
VSP 30 156 189 192 228 254
TISCO 72 80 133 179 218 277

Sour ce: SAIL, Sta t ist ics for Ir on a nd St eel In du st ry in In dia, var iou s issu es
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Ta ble 6. Sh a r e of Cr u de st eel produ ction by pu blic a n d pr iva t e sect or s (%)
1991-92 1994-95 1997-98 2000-01 2003-04

Public sector 64.8 62.7 54.0 50.9 48.9

Private sector 35.2 37.2 46.0 49.1 51.0

TISCO 14.9 14.1 13.1 13.3 13.1
Others 20.3 23.1 33.0 35.8 37.8

Total 100.0 99.8 100.1 100.0 99.9

Sou r ce: SAIL, St a t ist ics for Ir on a n d St eel In du st ry in In dia , va riou s issu es
Not e: Tot a l er r or s der ive fr om or igin a l da t a .

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Ta ble 8. Tr en ds in Ma r ket Sh a r es (va lu e t er m , %)
Domest
Total
Market ic
SAIL TISCO ESSAR JSW ISPAT RINL for the Import Export
size Consu
sample
mption

1992-93 47.5 10.7 - - 1.9 3.7 87.8 12.2 100.0 - -

1993-94 47.1 10.8 - - 1.9 4.9 88.5 11.5 100.0 - -

1994-95 39.8 10.8 - - 2.0 6.0 86.4 13.6 100.0 6.2 93.8

1995-96 36.2 10.7 2.5 - 1.8 7.1 86.0 14.0 100.0 6.8 93.2

1996-97 31.5 10.2 5.6 - 1.8 6.8 86.8 13.2 100.0 7.4 92.6

1997-98 30.0 9.4 6.3 0.5 1.8 7.5 86.5 13.5 100.0 8.4 91.6

1998-99 28.7 8.6 5.0 1.3 2.8 11.4 88.5 11.5 100.0 5.7 94.3

1999-00 29.5 9.7 5.2 2.0 4.3 6.1 90.9 9.1 100.0 7.9 92.1

2000-01 28.4 9.3 5.1 2.8 4.1 6.6 92.7 7.3 100.0 9.6 90.4

2001-02 28.9 9.7 4.5 4.3 3.5 8.0 91.6 8.4 100.0 9.1 90.9

2002-03 27.0 11.1 5.5 3.7 4.3 7.2 92.8 7.2 100.0 14.2 85.8

2003-04 28.0 11.1 5.1 3.8 4.6 7.3 91.0 9.0 100.0 14.8 85.2

2004-05 27.6 10.7 6.2 5.7 5.6 5.4 88.8 11.2 100.0 15.7 84.3

Sou rce: Econ omic In t elligence Service, In d u stry: Mar ket s a n d Sh a res, va r iou s issu es
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Note: Nu m ber of sa m ple com pa n ies ar e 226 u p t o 1993/94, 241 u p t o 1995/96, 368 u p t o 20
2001/02 a n d 433 for t h e r est s.
Table 9 Appa r en t con su m pt ion of cr u de st eel per ca pit a (kilogr am s)
India China South Korea Japan World

1975 14.0 38.0 84.0 608.0 n.a.

1980 14.0 45.0 148.0 675.0 n.a.
1985 19.2 64.9 277.2 607.2 151.3
1990 26.0 59.4 501.0 801.6 149.8
1995 28.3 81.7 822.6 672.2 139.1
2000 30.1 128.0 851.1 635.0 154.6
2005 37.6 268.6 1014.7 648.5 157.6

Sou rce: IISI, St eel St a t ist ical Year book, va riou s issu es

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Figu re 5. E xpor t s a n d im por t s of sem i-fin ish ed and fin ish ed st eel pr odu ct s (1975-2005,
1000 t on n es)

7000

6000

5000

4000

3000

2000

1000

0
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20
Export Import

Sou rce: IISI, St eel St at ist ica l Year book, variou s issu es back
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