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NationalSteelPolicy2012(Draft)

1.0 Preamble1.1 Steelwillprobably remain theworldsoneof themost importantengineeringmaterials for a long time to come.With strongbackwardand forward linkages, steelindustry is an engine of economic growth and a symbol of economic prosperity.Moreover, steel is vital to the nations economic security as it is extensively used instrategic areas such as defence, power, atomic energy, and in creation of social andeconomicinfrastructureofthecountry.1.2 Most of the developed nations during their course of economic developmenthad reliedheavilyon theirdomestic steel industry tomeet the requirementof fasterindustrialdevelopmentand forbuildingphysical infrastructure.Even thoughsteel isafreely tradedcommodity, large scaledependenceofagrowingeconomy like Indiaonimported steel may make the economy vulnerable to uncertainty in global supply,exportpoliciesofdifferentcountriesandvolatilityininternationalprices.ForIndia,thecasefordomesticproductionofsteel isevenstrongerdueto indigenousavailabilityofresources and a need to minimize strain on current account balance. In fact, therevealed comparative advantages of labour and raw material have the potential ofmakingIndiaaleadingexporterofsteelintheworld. 1.3 TheNationalSteelPolicy2005 (NSP2005)was formulatedata timewhen theIndiansteel industryhad justmoved intoahighergrowthpathwithshowingpromisesofasignificantresurgenceanditenunciatedimportantmilestones/physicaltargetsandanoverarchingbroadpolicyframeworktoachievethestatedendonanassumed6.9%growth in steel consumption, 7.3% growth in steel production and a 23% share ofexportsintotalproductionbytheyear201920.1.4 Sincethen,however,theIndianeconomyexperiencedaparadigmshiftwiththeactualperformanceof theeconomyaswellas thatof Indiansteel industrysurpassingtheprojected levelsofperformance.Steelconsumptiongrewby10%perannumfrom200506to201112andproductionatanannualrateof7.8%duringthesameperiodtherebysurpassingtheNSP2005projectionsbyasignificantmargin.1.5 Atthesametime,duetorelativelyfastergrowthinsteelconsumptioncomparedto production, the strategic goal of achieving a 23% share of exports in productionremainedunrealizedandIndiabecameanetimporterofsteelfrom200708onwards.Amajor concern in the last few years has been the slow pace of capacity buildup,especially through investments in greenfield sites due to supplyside bottlenecks inareas such as acquisition of land, grant of environmental and forest clearances,availabilityofrawmateriallinkagesandotherinfrastructurerelatedsupportsneededby

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thesector.Further,thequalitativeperformanceofthesteelindustrymeasuredintermsoftechnoeconomicparametersofefficiencyandproductivityhasbeenmuchbelowtheexpectation. It isalsobeing felt thatgrowthof the industryhascomeatasubstantialcosttotheenvironmentandlocalcommunities.1.6 The development of domestic steel industry has to be guided by longtermnational goals and perspectives. National Steel Policy has, therefore, to be dynamictaking into consideration the changing needs of the industry in view of significantchanges in the domestic and global economic environment. The unfoldingdevelopments, both on the demand and supply sides, warranted a relook at thedifferent elements of the NSP and possibly some reordering of priorities andmodifications inthetargetsandrelatedpolicies. Inparticular, itwas feltthatastrongpolicypush is required toexpedite creationofgreenfield steel capacityasgrowth insteelsupplyhasnotbeenkeepingpacewithrise indomesticdemandforsteel. Itwasalso felt that policy making should address the issues related to sustainable growthespecially related to long term availability rawmaterials, protection of environment,inclusive growth, quality of steel products and Research&Development (R&D)withgreaterfocus.1.7 Withthisobjectiveandwithintheaboveperspective,theGovernmentofIndia,decidedtoformulateNationalSteelPolicy,2012(NSP2012).2.0 VisionStatement2.1 TheNationalSteelPolicy2012aimsattransformingIndiansteelindustryintoaglobal leader in terms of production, consumption, quality and technoeconomicefficiencywhileachievingeconomic,environmentalandsocialsustainability.ThevisionofNSP2012istoensureavailabilityofqualitysteeltoaccelerategrowthofthedomesticeconomyandprovideamenitiesoflifetothepeopleofIndiaatparwiththedevelopedworld.3.0 Objectives&StrategicGoals3.1 Inthecomingyears,thesteelindustryinIndiawillberequiredtogrowatafastpacewithmaximumefficiency in resource consumption. However, steelbeing aderegulatedsector,Governmenthasonlya limitedroletoplay,mainlyasafacilitator,toensurefasterandefficientgrowthofthisindustry.3.2 The objectives and strategic goals, however, have been defined to provide abroad direction and guidance to future programmes, policy actions and variousdecisionsof theGovernmentand investors.Governmentwill,however, takeupontheresponsibilitytoensuresustainabledevelopmentofthesteelindustry,providesufficientinfrastructureandfacilitateeasyavailabilityofvitalinputssuchasnaturalresourcesandfinancetosupportfastergrowthof Industry.Thesteps towardsachievingthedefined

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objectives and strategic goals will be taken through coordinated efforts of thegovernment,industryandotherstakeholders.3.3 Tochartaroadmapforthegrowthofsteel industryandreorderpriorities, it isnecessarytounderstandtheexistingstrengths,weaknesses,opportunitiesandthreats.ASWOTanalysisoftheIndiansteelindustryisplacedatAnnexureI.3.4 MajorObjectivesoftheNationalsteelPolicy2012areasfollows:a) To attract investments in Indian steel sector from both domestic and foreignsourcesandfacilitatespeedy implementationof investment intentionsonboardsofarsoastoreachcrudesteelcapacity levelof300milliontonnesby202526tomeetthedomesticdemandfully.b) Toensureeasyavailabilityofvitalinputsandnecessaryinfrastructuretoachieveaprojectedproductionlevelof275milliontonnesby202526.c) To provide greater focus onResearch andDevelopment (R&D) fordevelopingindigenous technologies especially for finding solutions for optimum utilization ofindigenousresourcesandmitigatingtheconcernsofenvironmentandclimatechange.d) Todevelop indigenouscapabilitiesofdesign,engineeringandmanufacturingofcriticalcapitalequipmentsrequiredforsteelproduction.e) To encourage production and consumption of valueadded steel by providingnecessaryfocusonavailabilityandproductdevelopmentespeciallyfor(a)meetingthespecialrequirementsofruralIndia,b)meetingthespecialrequirementofauto,power,constructionandshippingsectorsc)producinglighterbutstrongersteelswhichhelpinachievinghigher energy efficiency in end applications and alsohelp inmitigating theconcernsonenvironment,climatechangeandhumanhealth.f) To foster competition at the market place, discourage cartelization andencourage production of quality steel formaximization of consumerwelfare and forprotecting the interests of common man and while simultaneously protecting theproducersagainstunfairpracticesofdomesticandoverseascompetitors.g) To ensure sustainable development of the industry with minimum possibledisplacementoflocalpeopleandlossoftheirlivelihoodsandwithminimumdamagetotheenvironment byadoptingbestpractices intheproductionprocessesandensuringadoptionofpeopleandenvironmentfriendlypracticesbytheinvestors.h) To become globally competitive by achieving efficiency levels at parwith theglobal bests especially in areas such as energy consumption, material efficiency,quality of steel, water consumption, productivity of major iron/ steel making

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equipment, pollution levels and CO2 emissions. NSP 2012 envisages achieving thefollowingstrategicgoalsby202526,asshowninAnnexureII.4.0 ProjectionsofDemandandCapacity4.1 SteeldemandhasbeenforecastbasedonaprojectedgrowthpathoftheGDPasgrowth insteeldemand isclosely linked to thegrowth inGDPand the intensityofsteeluseintheeconomy.4.2 Taking intoaccount therecentdevelopmentsaround theworldand the Indianeconomy and observing the general pattern of growth in other middle income andemergingeconomies,steeldemandhasbeenprojectedundertwolikelyscenariosof7%and8%GDPgrowthratesperannum.(Table4.1)Also,anotherscenarioof6.0%GDPgrowthrate,howeverunlikelythismaybe,hasalsobeendrawnuptoassessthecriticalminimumrequirementoftheeconomyintheworstcasescenario.(AnnexureIII)4.3 The basic assumptions of the steel demand forecast adopted here are asfollows.a) GDP growth is sustained around 7 8 percent per annum with perceptibleimprovementsinbasicstructuralstrengthoftheeconomysothattheprojectedgrowthratescanbesustainedoveralongterm.Projectionsmadehere,however,assumethatnodrasticstructuralchangeoftheeconomywilltakeplaceinvolvingmajorparameterssuchassavingsandinvestment.

b) The projections of demand has been made on the assumption of zero tradebalanceinsteele.g.,importsandexportsofsteelbalanceout.4.4 Estimateddemand forsteeland thecrudesteelcapacity required tomeet thedemandfromdomesticproductionarefurnishedinTable:1.

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Table1:EstimatedSteelDemandandrequiredCrudeSteelCapacity,201112to202526

(MillionTonnes)

ProjectedDemandforFinishedSteelGrowthScenario201112(actual)

202526 CAGR(%) ImplicitGDPElasticity

GDPGrowthat7%pa(BaseCase)*

70.92 202 7.8% 1.11

GDPGrowthat8%* 70.92 233 8.9% 1.11CrudeSteelCapacityRequiredtoSustainProjectedDemandintheBaseCase

88.40 244

Note: * The assumed growth rates are average for the years between 201112 and202526,notwithstandingpossibilitiesofyearlyfluctuations/swingswithintheperiod.4.5 Projecteddemandforprocessedinputsi.e.,PigIronandDRI/HBIintheBaseCaseScenarioisplacedatTable:2.Table2:EstimatedDemandforProcessedInputs,201112to202526 (Milliontonnes)

201112 202526PigIron 5.4 16DRI/HBI 20.3 34

4.6 TheprincipalstrategicgoaloftheNSP2012asfarasdemandandsupplyofsteelis to create conditions such that theprojecteddemand ismetprimarilybydomesticproduction. In other words, the goal is to create adequate capacity to produce therequiredquantities.

5.0 ProjectImplementation5.1 Creationofgreen field steelcapacitieshasbeenundulydelayed, in the recentpast.Amongmanyfactors,itisalsoduetoa)involvementoflargenumberofagenciesinvolvedinprojectclearancesb)lackoftimeboundsystemofgrantofclearancesandc)longpendinglegislationoncriticalfactorsofproductionsuchasland,mineralresourcesandenvironmental/forestclearancesandd)strongsocialresistanceto landacquisitionand conversion of agricultural land to industrial land even at adequate offer ofmonetarycompensationandsecuritizationofemploymentof thedisplaceddirectlyorindirectly. To overcome these constraints, the government will consider taking thefollowingmeasures.

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a) Introduction of a transparent and easy system for submission and tracking ofstatus of applications for grant of resources/clearances from multiple governmentalagenciesthroughanonlinesingleewindow inconsonancewithnationalegovernanceplan.b) Enhance, the powers of the existing InterMinisterial Group (IMG) for moreeffectivecoordinationtocutdelaysinprojectimplementationresolutionofconflicts.c) TheNewlandAcquisitionAct,R&RPolicyofthegovernmentandnewprovisionsoftheproposedMMDRActhavealreadytakenuptherelevant issuesandoneexpectsthepolicyandprocedural issuestohavebeensortedout inthenearfuture.However,there is a need to eliminate potential conflicts arising out of the various policydocuments so that transparency is brought about in every aspect of the policyframework.Thegovernmentwilltakeappropriatestepsinthisdirection.d) There is a need for proper identification of project sites/areas to balancerequirementsofbusiness,societyandserviceproviders.Manysteelprojectshavenottakenoffduetoconflictinginterestsofvariousstakeholders.Therefore,thereisaneedtocreatean institutionalmechanismconsistingofproducers,projectevaluators, localadministrationandserviceproviderse.g.railways,NHAI,portauthorities,MOEFetc.forinformeddecisionsonsiteselectionforfaster implementationofprojects. Apartfromthe interMinistrialGroup (IMG)thatalreadyexists,thegovernmentwillsetupanewgovernment body for the purpose involving government agencies and experts inrespectivefields.e) The government will appoint an appropriate agency to prepare documentshighlightingthebenefitsofindustrializationandorganizeregularinteractionswiththemtocreateaconduciveenvironmentforinvestmentinsteelcapacity.

6.0 RawMaterials6.1 Indiascompetitiveedge insteelproductionderives,toa largeextent,fromtheindigenousavailabilityof ironoreandcoal toa limitedextent the twomostcriticalinputsofsteelproduction.However,recentdevelopmentsinIndiasminingsectorhavegiven rise touncertainties in regards to theiradequate supplypotential,especiallyofiron ore, and have brought the issue of long term raw material security for Indiasburgeoningsteelindustrytothecentrestage.Sustainingthecompetitiveadvantageforthe Indian steel industry rests crucially on devising appropriate strategies to ensureuninterruptedsupplyofthesteelmakingrawmaterialstotheIndiansteelindustryoverthenextfewdecades.

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6.2 Raw material requirement for the Indian iron and steel industry has beenprojectedandplacedatTable:3.Table3:ProjectedRequirementofMajorRawMaterialsfortheIndianSteelIndustryby202526 (MillionTonnes)

RawMaterialRequirement MillionTonnesAt7%GDP 201617 202526IronOre 203 392CokingCoal 89 173Noncokingcoal 27.8 66.2PCI 4.5 9.0MetCoke(includingcaptive) 67.4 89.2 At8%GDP 201617 202526IronOre 215.4 452CokingCoal 94.2 200Noncokingcoal 30.4 78PCI 4.8 10.4MetCoke(IncludingCaptive) 72.5 153.9

IronOre6.3 Despitethecountryhavingatotalresourcesofover28billiontonnesofironoreand the fact that the number can risewith greater efforts towards exploration, thecurrentlyassessed reservesof ironore seem inadequate if the steel industrycapacityexpansion and production potential are to be fully realized. Strict enforcement ofenvironmentalandforestrelated lawsanddifficulties inacquisitionof land implythatiron ore supply may not be able to keep pace with projected domestic demand ifproduction targets are to be realized. Exploitation of magnetite resources will be achallenging task asmost of these resources lie in environmentally sensitiveWesternGhats and adjoining areas. The current judicial position and the declaration of theWesternGhatsasaworldheritage sitewill restrain fullexploitationof the resourcesthere.Theironoreresourceswillbeexhaustedevenfasterifexportsaremaintainedathighlevelssimilarthosewitnessedinthepastfewyears.

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Thegovernmentwilladopt the followingactions toensureadequate supplyof ironoretothesteelindustry.6.4 There isaview that thecurrentassessmentof ironorereserves/resourcesareunderestimated asthesamehavesofarbeingbasedonexplorationdepthofonly60metersandtheFecutoffat50%only.Futureefforts,therefore,willhavetofocusedonexplorationbeyondthedepthof60metersandbringingdownmakinguseofthe ironorewithFecontentaslowasthat.6.5 To enhance the exploration and mining of iron ore, a detailed study will beundertaken involvingdomesticand foreignexpertagenciestoexplorethepotentialofminingironoreintheecologicallyfragileareasinthecountry.Oneofthetechnologiesthatmayneedattention for support isundergroundminingwhichhasbeenengagedsuccessfullyinseveralpartsoftheworld.6.6 Support intensive R&D efforts for developing technoeconomically viabletechnologiesofbeneficiationandagglomerationsuitableforthemineralextractedfromdifferentironoreregionsofthecountry.6.7 Take appropriate fiscal measures, whenever deemed necessary, to encouragebeneficiation and agglomerationwith special emphasis onmanufacture of pellets tosubstitute consumptionofprecious lumporesby steelproducersand therebyadd toeffortsofconservationandenvironmentaldegradationcausedbyaccumulationof ironorefines.Thegovernmentmaydevisedifferentialschemestoencourageinvestmentinbeneficiationdependingontheownershipofthe ironore,suchasthosecoming fromcaptiveminesandthoseboughtoutfromthemarket.

PrioritiesforAllocationofcaptiveIronOreMinestoSteelProducers

6.8 Lack of raw material security has been one of the major causes for tardyprogressofsteelcapacityexpansionprojects (bothgreenfieldandbrownfield) in therecent past. The government will consider to further strengthen the provisions ofallocationofcaptive ironmines tosteelproducers ina transparentmanner throughaprocess of open bidding for all the well prospected mines after having earmarkedpotential largeareas for thepurpose. .Thegovernmentmay furtherconsiderputtingsomeoftheironoreminesinageneralcategoryopenforbiddingbyall.ExportofIronOre6.9 Ifexportofironoreisnotrestricted,thecountrymayhavetoimportironoreinlargequantities in the futureat the forecastrateofgrowthof thesteel industry.Thismay jeopardize the long term competitiveness of Indian steel industry. Given the

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possibilityofearlyexhaustionof ironore, thegovernmentwillconsider the followingmeasures.a)AnInterMinisterialCommitteewillbeconstitutedtodrawuparoadmapforphasedreduction of iron ore exports to amoderate level.While holding a general policy todiscourage ironoreexports,thegovernmentwillactivelyengage itself ingranting ironore mining concessions in an absolutely transparent manner to draw adequateinvestmentintotheareaandtoensurefinallythatthereissufficientminingcapacitytofeedthegrowingdemandforironorewithinthecountry.b) The government will incentivize beneficiation of low grade iron ore fines toensure long term suppliesof iron ore to thedomestic industry and trigger adequatetechnologychangewithintheindustryforironmaking.

c) Thegovernmentwillengageanappropriategovernmentagency todrawupalongtermResourceSecurityandDevelopmentPlanforthe IndianSteel Industryandmonitorthesameonadynamicsbasis.

OtherIssuesinIronOre6.10 Tomakeavailableadequateironoreresourcestotheproposedsteelplantsandtherebyacceleratecreationofdomesticcapacitytomeetenvisaged futuredemandofaround 250million tonnes (i.e., an additional demand of around 140million tonnesrequiringcreationofapproximately170milliontonnesofcrudesteelcapacityoverthenext1213years),appropriatepolicymeasureswillbetakentoexpedite:a) The governmentwill remove the barriers tomovement of iron ore from onestatetoanotheranddevelopacomprehensivefederalpolicyinrespectofallocationofironoreminestosteelproducersoncaptivebasis.

b) Thegovernmentwillopenupalltheminingleasesheldbythesteelproducersoncaptivebasis,whichareyettobeinoperationandthosewherenoinvestmentshavesofar been made, for bidding among other steel producers. While doing so, it will beensured that the same lies in excess of the projected requirement of the respectiveproducersforthenextthirtyyears.

CoalDomesticCokingCoal6.11 Importsofcoalby the Indian integratedsteelplantsusing thehotmetalroutehas increasedrapidlydueto inadequateavailabilityof lowashmetallurgicalcoal fromdomestic sources.The volatility andupwardpressure seen in thepricemovementof

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internationallytradedcoalhaveputtheIndiansteelindustryunderconsiderablestressintherecentyears.6.12 The government proposes the following measures to enhance thereserve/resourcepositionofcokingcoalinIndia:a) As indigenous proven resources of prime coking coals are very limited,exploration efforts have to be focused on the prime coking coal resources availablebeyond300mdepthtobringthemto 'Proved'categorystatus.Remainingresourcesofcoking coals in other coal fields also need to be explored in detail to make themavailableforexploitation.b) ExistingcokingcoalminesunderCILinoperationaretobedemergedtoformaseparatePSU.c) IdlecokingcoalassetslyingwithCIL,tobeofferedforcommercialexploitationtootherPublicSectorUnits(PSUs)undersuitabletermsofoperationandbusinessd) Virgincokingcoalassets,lyingundevelopedwithCILcanalsobeputonauctionforsteelcompaniesforunrestricteduseforcaptiveconsumptionormerchantsales.6.13 In addition, the government shallmove towards phasedderegulationof thecoalsectortotap itsfullpotential. Itwillalsoprovide incentivesforundergroundcoalmining through taxbreaks, lowerroyaltyand financialsupport tonew technologies inundergroundmining.6.14 In order to increase availability of coal to steel producers in the short to themediumrun,thegovernmentshall,a) Encouragegreater investment inwashingandbeneficiationof lowgradecokingcoal so as tomake them suitable for use in the steel sector and thereby stop theirdiversiontootheruses.Thegovernmentwillalsoencouragedrybeneficiationofcoalatpitheadsothattheloadontransportsystemislowered.b) EnsurespeedyimplementationofthealreadyapprovedJhariaActionPlan(JAP).c) Drawup long termFuelSupplyagreement (FSA)between coal companiesandSpongeIronproducersandotherintegratedsteelplants(ISPs)d) Encourage integrated steel producers to set up their own washeries andbeneficiate raw coking coal procured from CIL to produce washed coal of requiredquality.

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ManganeseOreandChromiteOre6.15 TheothercriticalrawmaterialsforsteelmakingofwhichIndiahassizablereserves

areManganeseandChromiteores.However,withincreasingexportswitnessedinthe recentyears there isanurgentneed toconserve these resources for futuredomesticvalueadditionanduseintheIndiansteelsector.Thistakesonaspecialsignificanceashighgradeoresareindangerofbeingdepletedinthenearfuture.Forbothoftheserawmaterialsthereisaneedtocurbunfettereddirectexportofminedores.

6.16 The government will further strengthen and rationalize the existing policy

frameworksothatexportofores,especiallyhighgradeores,isreducedkeepinginview the rising consumption of the Indian steel industry. Apart from restrainingexports, the governmentwill also encourage investments in beneficiation of lowgradeoresthroughnecessaryincentives.

6.17 The government of will encourage exploration of deep sea nodules for

manganeseore.Forthis,thegovernmentmayconsiderprovidingequityfundingtotheexistingPSUstosetupsubsidiariestoundertakethesespecificactivities.

6.18 Thegovernmentwilldiscourageexportofchromiteoreforconservingthesamefordomesticvalueaddition

Limestone6.19 Inthisareathekeypolicyconcernsare: InviewofverylimitedavailabilityofsteelgradelimestonedepositsinIndia,the

government will act to ensure that steel grade limestone are wasted bysupplyingthemtocementproducers.Itneedstobeconservedforutilizationbysteelplantsonly.

FerroAlloys

Government may also consider allocation of coal blocks on captive basis to

powerplantsattachedtoferroalloysproducingunits. There is a need for government sponsored research in collaboration with

industry intheareaofbeneficiationof lowgrademanganeseoreforutilizationbydomesticferroalloyindustry.

Refractories6.20 EnhancedR&Deffortsarerequiredforincreasingtheuseofindigenousinputsby

developingsuitabletechnicalspecifications.

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7.0 InfrastructureSupportProjectedLocationofSteelCapacitiesbasedonCurrentInvestmentIntentions7.1 Expressed investment intentions and progress of the various ongoing steelprojects indicate concentrationof steel capacity close to the sourcesof rawmateriali.e., in the ironore richstatesofOdisha (25%),Chhattisgarh (13%), Jharkhand (14%),Karnataka (9%) and the adjoining areas of Andhra Pradesh. With anticipated predominance of technologies using hot metal, it is expected that this geographicaldistributionofsteelmakingcapacitywouldcontinueoverthenext20 25years,withmarginalvariation inthe latteryearsasavailabilityofsteelmakingscrap(obsoleteandprocess)increasesintheindustrialregionsoftheSouthandtheWest.Clearly,mostofthe infrastructural needs of transportation, energy, land and water would beconcentratedinandaroundthesecentersofsteelactivityinthenext2025years.Alternative/IdealLocationofSteelPlant7.2 Choice of locating a steel plant is a business decision taken by individualproducersonconsiderationsofspecificbusinessinterest.Currently,anoverwhelminglylarge proportion of the new capacities are concentrated in and around the ironorebearingstates.Transportationnetworkintheironorerichstates,whichalsohappentoberichinotheressentialminerals,isalreadyhighlycongestedgivingrisetoanumberofnegative externalities. Moreover, many of the chosen locations are situated inecologically and sociologically sensitive areas where acquisition of land for buildingadequatetransportationnetworkposessignificantproblems.7.3 Taking into account the considerable social and environmental costs ofconcentrationof extractiveproductionunitswithin a limited geographical area alongwiththegrowing importdependenceof Indiansteelplantsforcokingcoal,effortswillbemadetosupportdiversified locationofsteelplantsawayfromthecurrenthotspotstoshorebasedfacilities.Thiswillreinforcetheprivatechoicesalreadyevidentinafewofthenewprojectproposals.TransportationInfrastructureRail,Road,Port&SlurryPipeline7.4 IntheBaseCaseScenarioofdemandandsupply,totaltransportationneedsofthesteelsector(i.e.,majorrawmaterials,finishedsteelandpig iron) isslatedtomorethandoublefromaround325milliontonnes in201112toabout815milliontonnes in202526.Risingshareoflargeproducersintotalsteelproductionindicatesthataround7075%ofthiswillbetransportedbyrailandtheremainingbyroad.

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Railways7.5 Apartfromthegeneraldrawbacksofthe IndianRailwaysystem(e.g.,veryslowexpansionofroute lengthandfixed linecapacity,congestion inmaintrunkroutes, lowcapacityofrollingstocketc.),thespecificareasofconcernfortheIndiansteelindustrywhere immediateaction isneeded includea)strengtheningandaugmentingrailwaylinksbetweenportsandsteelplantsasIndiansteel isexpectedtobecome increasinglydependenton imported coking coal/coke;b) capacityplanning,mobilizationof fundsand timely execution of railway projects in the iron ore mining areas; and c) Mostimportantly, augmentation of rail infrastructure in the eastern and southern stateswhere large steel capacitiesarebeingplanned in closeproximity tomajor sourcesofironoreinthecountry.Thegovernmentwilltakeappropriateactionsinthisregards.7.6 Further,thegovernmentwillseektoa) Create aMineralDevelopment Fund for building infrastructure in theminingbeltsb) Thegovernmentwillbringinnecessarypolicychangesinrespectofrailwaysandpromote private sector participation in specific projects involving secondaryinfrastructuresuchasdedicatedrailwayslinesconnectingminestoplants,etc..c) The government will priorities funding of the projects connected with DedicatedFreightCorridoralreadyapproved.Roads7.7 Themodalswitchofsteelrelatedtransportationawayfromrailwaystotheroadsector after deregulation has been caused primarily by the dispersed geographicalspreadoftheproliferatingsmall/mediumscaleunitsapartfromtheinadequaciesintherailway transportation system in handling the bulk transportation needs of theexpanding Indian steel industry. The reason for increasing importance of roadtransportation has also emerged in the context of the need for efficient last miledistribution of finished steel to endusers located in distant areas. Lastly, roadtransportation has become an important element in a multimodal transportationmatrix,especially,aspartoftheportrelatedtransportationnetworkfor importofrawmaterialsandexportoffinishedsteel.7.8 Specific concerns for the steel industry in road transportation include low roaddensity and poor quality of roads in the three ironore rich states resulting in hightransaction costs due to delay and loss of materials in transit. A second source ofproblem is the inadequatenetworkof stateanddistrict level roadsconnectingminesand plants to the National Highways, especially in the mining areas in the easternsectors.Inviewoftherisingimportanceofroadnetworkinsteelrelatedtransportation,effortswillbemadetopromoteandencouragePPPmodeoffundingofroadprojectsas

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avitallinkinmultimodaltransportationsystem,especiallyinrelationtoportandmineconnectivityanddistributionofsteelinremoteareas.Ports7.9 Assuming imports of 85% of coking coal, 20% of noncoking coal and 30% ofscrapandimportsandexportsofsteelat10%ofconsumptionandproductionby202526, total steelrelated port traffic is projected to increase twofolds from around 64MillionTonnesin201617toanestimatedlevelof130milliontonnesintheBaseCase.7.10 Asfarasportsareconcerned,themajorproblem isnot inadequacyofcapacitybut of low productivity of operations attributed mainly to slow evacuation of cargoleading to increased transactioncostsand lossofcompetitivenessof the Indiansteelindustry.Thegovernmentwilltakespecificmeasuresinthisrespectfocusingon:

a) Acceleration in the rateofevacuation through seamlessconnectivityofportswithamultimodalsystemof land transportation i.e., railwaysand roads,underthePPProutewithactivecollaborationamongststeelinvestors,thestategovernmentsandotherrelatedagenciesprovidingtransportrelatedservices.

b) Providingrequiredassistanceinbuildingofdeepdraftportssothatlargervesselscanbeberthedandeconomiesofscaleareachieved.

SlurryPipelines7.11 Alternativemodes of transporting rawmaterials e.g., through slurry pipelineswillgoalongwayinreducingtheproblemsofcongestedtransportationnetworkintheminingareas.Sucheffortsalsodeserveencouragementandsupport.Thegovernmentwillactivelysupportinvestmentonslurrypipelinesthroughappropriatefiscalincentivessuchastaxbreaks.CoastalWaterwaysandShipping7.12 Given thesourcesof rawmaterialsand increaseddependenceon imported rawmaterialssuchascoal,itislikelythatmoreandmoresteelplantswillbelocatedinthecoastalareas.Thismeans, therewillbestrongpotential forcoastalmovementof rawmaterialsandfinishedproductsfromoneplacetoanotherinthecountryitself.Coastaltransportation can also takeplacepartially in amultimodal system if theplants arelocated in the hinterland. The government will actively encourage this mode oftransportation to reducepressureon the existing railways and roadways system andcreatethenecessaryinfrastructureforthesame.

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Power7.13 IntheBaseCasescenario,powerrequiredbythesteel industry isestimatedtoincreaseto16,000MWin202526fromaround8200MWin201617.ThetopfoursteelproducingstatesofOdisha,Jharkhand,ChhattisgarhandKarnatakaarepowersurplusasfarasgenerationisconcerned.However,deficitsinpeakpowerandenergylevelsoccurandarelikelytocontinueasthesestatesareunderobligationtotransferpowertootherregions.Forsteelprojects,especiallythelargewithcaptivepowerplants,theproblemswillbelesssevere.However,dependenceongridwillcontinuetobehighforsmallandmedium steel units. As power generating capacities rise in the country with megaprojects under construction, the governmentwill ensure adequate assured supply ofpowertothedomesticindustrythroughthenationalgrid.Thegovernment,atthesametime,willconstantlyencourageuseofenergy intensivetechnologies intheproductionofsteel.Water7.14 Consumption of water by the steel industry is estimated to go up from 360million cu.m. in 201617 to around 650million cu.m. in 202526 in the Base CaseScenario.Totalrequirementofwaterbysteelisaminutefractionoftotalconsumptioninthecountryi.e.,steelssharewasonly0.04%in200607at215millioncu.m.outofatotalof62900MillionCu.M.Totalindustrialusageduringthatyearwas5percent. 7.15 Thethree largest ironorebearingstatesofOdisha,JharkhandandChhattisgarhhave large surface water sources (i.e., river basins) and also account for 10% of allgroundwaterreservesinthecountry.Despitethis,steelprojectsmayfaceproblemsonaccountof lowpriorityaccordedtothe industry inallocationofwater.Moreover,theneedforsteelproducerstobuildexternalinfrastructureforaccessingwaterasaresultof inadequate public storage infrastructure and low public water supply also poseserious problems for the steel industry. Very often such efforts result in excessivedependenceongroundwaterresources7.16 Tominimizethedeleteriousintergenerationalenvironmentalandsocialimpactsof depletion in ground water resources and contamination of water sources byindustrialeffluents,effortswillbemadeto:

a) Involveallstakeholders i.e., localcommunity,thesteelplants,thestateagencies, in chalking out an optimum water sharing agreement andmonitoring of the quality ofwater in the variouswater sources in thevicinityofsteelunits.

b) The government will initiate water footprint mapping and rainwaterharvestinginsteelindustryandrelatedminingareas.

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c) FixasystemofpenaltyandrewardsaimedatbridgingthegapbetweeninternationalbestpracticenormsofwateruseorrecyclinginsteelplantsandtheIndianstandardpractices.

Land7.17 OneofthemajorimpedimentstogrowthfortheIndiansteelindustryinthepastdecadehascomeintheformofdelaysinacquisitionofadequateLandatthepreferredlocations.7.18 It isexpectedthatthebenefitsofspeedytransferof landwill faroutweightheextraprivatecostsincurredonaccountofaddedsocialresponsibility.However,aslandbecomesmore expensive, it is expected that the plantswill use this resourcemoreefficientlyandthattherewillbesomesubstitutionoflandbycapitalatthemargin.Inaderegulatedsteeleconomysuchaprocesswillbetriggeredbyforcesofcompetition.7.19However,inordertoreducerequirementforland,thegovernmentwillencouragethe industry to have vertically arranged facilities in compact designs which takesignificantlylesslandevenifcapitalcostsforsuchplantsmaybeveryhigh.7.20 Similarly, formation of steel clusters, especially for small and medium sizedunits/ service/steelprocessing centresand creationof related common infrastructureonaconsortiumbasiswillbeencouragedandsupportedforoptimizinglandusethroughscaleeconomies.Effortswillbemadetoprovidefiscal/financial/administrativehelpforsuchsharedinfrastructureinsteelclusters.8.0IssuesinTechnology,R&DandEnvironmentalManagementMajorAreasofConcernandRelatedStrategies8.1 NationalMission forEnhancedEnergyEfficiency (NMEEE)aimsat reducing theemission intensityof IndiasGDPby2025percentby2020 from the2005 level.Thepotential of the initiatives devised by NMEEE should be fully exploited by steelcompanies, especially the small and medium enterprises, if they are to survive in astricterregulatoryenvironmentaimedatcompliancewiththestatedgoals.MinistryofSteelwillfacilitatetheIndustryintheprocessofutilizingopportunitiesavailableundertheNMEEE.8.2 ItisnowbeingincreasinglyappreciatedthatcompetitivenessoftheIndiansteelIndustrycannotbesustainedinthelongrunpurelyonthebasisoflowlaborcostsandcheaperrawmaterials.Technologicalexcellence,innovationandadoptionenvironmentfriendlytechniquesinallstagesofproductionfromextractionofmineralstotreatmentofwastesarethekeytosustainedgrowthinthissector.

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8.3(a)Majorareasofconcernandrelatedstrategiesareplacedbelow:

i) The government in partnership with the steel companies needs to framespecific strategies towards reduction of pollution level (PM) below 0.5 kg pertonneofcrudesteel,zeroeffluent(water)dischargeanddrasticallyreducewaterconsumption.ii)Absenceof a commonmethodology in reportingenvironmentperformancewith respect to the status on resource consumption, emissions, effluent andwaste recyclingmakes comparisonof relativeperformanceof the steelplantsdifficult. This calls fordevelopmentof an internetbased tool,which adopts acommonandverifiableprocedureforreportingofenvironmentdatabythesteelplants.iii) Documents on best available technologies (BAT) for energy efficiency andenvironmentprotectionshallbemadeavailabletotheIndustry,especiallysmalland medium enterprises, to ensure faster progress towards the goal ofsustainabledevelopment.Inaccordancewiththeworldwidetrendinadoptionofsuchtechnologies,thegovernmentshallencourage/mandate Indian industrytomakeuseoftheavailabletechnologies.iv)Strictenforcementofexistingenvironmental lawsandaphasedmovementtowards the internationalbestpracticenormswillbe followed to regulate thegrowth of environmentally damaging steel units. Stricter enforcement of taxlawstoensurethatgrowthoftheindustryisnotatthecostofenvironmentandlossofpublicrevenue.v)Steelplantswillbeencouragedtoachievethegoalsofzerowastegenerationthrough100%recyclingofwastesgenerated.AnationwidepolicyinlinewithflyashutilizationshallbeformulatedtomakeuseofLD/EAFslag.

b) Promote Smelting Reduction (SR) technologies which can use low grade ironore/slimesandindigenouslyavailablenoncokingcoal.R&Dinterventionandspeedyimplementationof these technologies compatiblewith Indias indigenous resourcebasewillbeencouraged.

c)Currently,expenditureonResearch&Developmenthasbeenquitelowvaryingintherangeof0.15to0.3percentofturnover.TheextremelylowlevelofexpenditureonR&D in the steel sectorposes a grave challenge to theprospectsof long termgrowthofthisindustry.ThestrategiesproposedtopromoteR&Dinthesteelsectorare:

i)LeveragetheGovernmentgrantsforR&DthroughPublicPrivatePartnershipstoachievethestrategicgoalofR&Dexpenditureat1.52%ofturnover.

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ii) A few dedicated Centres of Excellence could be set up, preferably withinvolvementof theprivate sector in industrial sites to address relevant issuesrelatingto:

a)Researchandtechnologydevelopment,andproductdevelopmentb) Human ResourceDevelopment through pursuingM.Tech, Ph.D and

Post Doctoral programmes for creating a talent pool for researchactivities.

iii)EffortsshallbemadetoimprovelinkagesbetweenlaboratorybasedR&Dandactual industrialapplication.Thisneeds tobedone throughextensivemarketdriventranslationalresearchcustomizedtotheneedsoftheindustry.iv)Thepriorityareas tobeconsidered for incentivizing the industryaswellasforpublicfundingofresearchprojectsshallbe:

a) Environmentmanagementb) EnergyefficiencyandreductioninGHGemissionsc) Optimum utilization of indigenously available natural resources

beneficiation,agglomerationandadoptionofSRtechnologiesd) Product development for strategic areas such as Defence, Space

ResearchandNuclearEnergye) Optimumutilizationofland,especiallyingreenfieldsteelplantsby

verticalspacemanagement,irrespectiveofprocessroutes.

d) In the absence of good design, engineering andmanufacturing facilities in thecountry, the steel producers have to depend on import of modern plants andfacilities atphenomenalcost.It isdesirablethatabeginning ismade inthisareatoavoid long termdependenceon importsofequipments. Someof theviablepolicyoptionsaregivenbelow:

i)Toovercomeresourceconstraintsforcreatingmanufacturingfacilities,poolingof resources by steel companies through a MOU may be undertaken withGovernment providing necessary incentives/ subsidy. Revival of HEC into amodernmanufacturingcentermaybeexploredasonetheviableoptions.

ii)Steelcompaniesmayassociate themselveswithknownequipmentsuppliersindividually or as a group to promote new process development activities.Generationofkeyknowledgeand IPRs from such collaborationswillmake theprocesseasilyadoptableduring thecommercialization stage.Governmentmaythinkofsuitableincentivesforsuchactivities

Iii)EncourageleadingglobalequipmentmanufacturerstosetuptheirmanufacturingbaseinIndia

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e) Shortage of professional/ Experts due to perceptible decline of interest inpursuingcareerinmetallurgicalindustriesamongstBTechs,MTechsandPhDsisanarea of concern. Education systems and corporate policies are to be tuned tofacilitateandgeneratedomainexpertsineverywalkofsteelplantstoachievehigherefficiencyandproductivity.

f) There is a need for instituting a professional body on the lines of World SteelAssociation,Japanese Iron&SteelFederationetcforknowledgesharing, informationdisseminationandevolvingnationwidestrategies.

9.0 PromotionofSteelUse/Consumption9.1 Promotion of steel consumption is to be undertaken primarily by the steelproducers.However, governmentwill encourage steel consumption, supporting R&Dprojectssuchasforproductdesignandgenericcampaigninspecificareaswhichhelpinaddressingconcernsrelatedtoenvironment,climatechange,humanhealth,housingforthemassesandhigherruralpenetrationforinclusivegrowth.Advantagesofsteeluseintermsofsustainability,durability,amenabledesignandlifecyclecostingcomparedtoalternatematerials like plastics andwoodwill bemademore visible and adequatelypropagatedthroughsustainedprogrammesofawareness.Someoftheapplicationareaswhichmayqualifyforthespecialtreatmentareasfollows:

a) Inspecificapplicationswheresteelcansubstituteacompetingproductonthepromiseofgreaterenvironmentalsafeguards.b) Promotionofstainlesssteelininfrastructuresuchasbridges,portsetc..inthecoastalareaswhicharepronetosevereandextremecorrosion.c) Promotionofstainlesssteelinrailwaycoachesforlongerlifeandpassengersafety.

d) Application of high strength steel and support to R&D for their use inautomotiveandapplianceindustries.

e) Promotion of application research involving tubular frames and otherprefabricatedproductsforuseinenergyefficienthighrisestructuresaimedatbringing in affordable housing to accommodate Indias growing urbanpopulation.

f)Thegovernmentwillencourageuseofsteelinareaswhereithasthepotentialtomitigatetherisksassociatedwithnaturalcalamitiessuchasearthquakes.

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g)Inpromotingandprovidingsafepackaging,inparticularforfoodproducts,toreplace competing toxic packagingmaterials and discouraging use of secondsanddefectivesteelmaterials.

9.2 TheGovernmentwillfacilitate,strengthenorevenengageappropriateagenciestoundertakecollection,processinganddisseminationoftechnicalinformationonsteelwith a view to promoting steel consumption backed by development of appropriateproducts,costreductionandqualityenhancement.9.3 The Government will take a lead in creating an institutional platform forknowledge sharing for suitableproductdevelopment and reliablemarket assessmentfor specific steel products by bringing together representatives of consumers,producers,designers,R&Dinstitutionsandotherstakeholders.

10.0TradePolicyIssues10.1 While deciding on import tariff levels for steel, implications of possibilities ofglobaloversupplydue to slowdown inmajor steelproducing countriesandpredatorypricing shallbekept in sight.Thegovernmentwillalsohave to take intoaccount thepotential erosion of cost competitiveness of Indian steel industry visvis the globalpeersduetochangesinrelativepricesofrawmaterialsandenergy,costsofcapitalandinfrastructureconstraints.10.2 Whiledecidingonthetermsofbilateral/regionaltradeagreementscareshallbetaken toensure a levelplaying field to the Indian steel industryespecially visvistradingpartnerswithmaturesteelindustry.Thiswillbedonekeepinginviewthebasictenets of free trade and international competitiveness and the possibility of tradedistortions hampering the progress of the growing Indian steel industry. In specificinstances,whereFTAsmay leadtosubstantialoverallgainsfortheeconomy,concernsof the steel sector may be addressed by not including steel in the list of items forpreferentialorfreetariffregime whenFTAsandPTAs involvenationswithstrongandcompetitivesteelindustries..10.3 Thegovernmentwillencouragethesteelindustrytofollowanaggressiveexportstrategy to tap the opportunities in the global market fully. As the developedeconomies,mainlyinEurope,arestrugglingthroughamajorfinancialcrisis,theoutlookonexportstothesecountriesdoesnot lookpromising.Furtherassociatedwithvarioustradedisputes,thecountryssteel industrywillhavetodiversify itsexportstomarketssuch as Africa, Latin America and Asia including ASEAN member nations. Thrust onexports isalsodesirabletomitigatetheadverseeffectsofcurrentaccountdeficitsandneutralizethe impactofpossiblerise in importsofcokingcoalandproposedreductioninironoreexportsonnetearningsofforeignexchangebythesteelindustry.

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11.0ConclusionsIn summary, with the above policy objectives and concrete actions emanatingtherefrom, the Indian Steel Industrywill grow toproduceover275million tonnesofcrudesteelby202526tocatertothegrowingdomesticdemand.Theindustrywillalsobe firm footed fully realizing thecompetitiveadvantages to raise theproduction levelfurther to tapopportunities in the globalmarket. The industrywouldbeplaced in aconducivepolicyenvironmenttoattainglobalstandardsinproductqualityanddevelopaproductmix in linewith the currentpatternofdemand in theglobalanddomesticmarkets.Theindustry,throughitsownactionswillbeexpectedtoattainhighlevelsofenergy andmaterial efficiency in production. The industrywould attain the highestlevels in information technologyapplication tobeaworld leader in this field. Labourproductivitywillbeexpectedtoreachtheinternationalstandardstomaketheindustrygloballycompetitive. The industrywouldgrow toprovide to thenation technicalandnotional self sufficiency in steel by 2015. Efforts at domestic market developmentwould increasesteelconsumption inthecountrytoprovidean impetusforcontinuousgrowthtothedomesticindustry.Arejuvenatedandrestructuredindustrywithfullbackup of informationwould provide stability to its growth. The industrywill gain fromimproved infrastructureandhigh levelofefficiency in the sectors linkedasbackwardintegrationlikemineralsandotherrawmaterials.WithalltheimprovementsenvisagedtheIndianSteelIndustrywillstanduptoglobalfocustoestablishitsplaceofeminence.

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ANNEXUREI SWOTANALYSIS

Strengths

1. Easyavailabilityofironoreforshortandmediumterms.2. LowwageratesinIndiainglobalcomparison.3. Potentialfutureavailabilityofmanpowerwithrequisitetechnical&managerial

skills4. New plants, technology and production efficiency approaching international

benchmarks.5. Higher efficiency gains expected from the existing integrated steel plants,

currentlyundergoingmodernizationandexpansionofcapacity.6. Strong legal institutions and administrative framework to support competition

withintheindustrytomaximizeconsumerinterests.7. A resilient domestic economywith potential of sustained growth in domestic

steeldemand.Weaknesses

1. Uncertainties in regard to futureavailabilityof ironoredue toenvironmental,legal and social challenges in addition to potential exhaustion risks due toexcessiveexports.

2. Asignificantportionofthesteel industrycontinueswithobsoletetechnologiesand produces poor quality steel, generates high level of pollution and CO2emissions.Socioeconomiccostsofcontinuationorofclosurecanbeveryhigh.Highertransportcosts,beingoneofthehighestintheworld,hasthepotentialtorobthedomesticindustryofvitalcompetitivestrength.

3. Inadequateavailabilityoflandinrightsizeattherightplace.4. Veryslow implementationof theprojectsdue tovarietyofproblems including

delaysinlandacquisition.5. InadequateeffortstodevelopnecessaryR&Dbasewithinthesteelindustry.6. Highdependenceonimportedcoalduetolowqualityofdomesticcokingcoal.8.

Lackof Indigenouscapabilitytodesignandmanufacture iron/steelequipmentsleadingtohighcapitalcost

7. Slowprogressinacquiringanddevelopingoverseasmineralassets8. High level of litigations especially related to grant of mineral assets and

environmentalclearances

Opportunities1. Stronglyexpandingeconomywith a low steel consumptionbase, a large and

growingyoungpopulationwiththeprospectofraisingsteelconsumptionbase,,backlog of investment in infrastructure ready to be cleared by visionarygovernment spending and potential expansion of the industrial base to raisesteelconsumptionbaseinthecountry.

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2. Opportunities in ruralmarkets are likely to increase significantly due to risingrural incomes,developmentplansofthegovernmentwithfocus inhousingandconstructionof rural infrastructuresuchasbridges,etc. tosupportastrongerruralsteelconsumptionbase.

3. Significantscopeofreducingcostsbyimprovingefficiencylevels4. More clarity on important policy issues such as land acquisition, grant of

mineralassetslikelytoemergeonenactmentofrelatedbillsThreats

1. Fearof thenewsteelplants losing competitivenessdue tohighcostsof land,labour, capital and higher provisions for protection of environment, CSR andincreases incosts towardsuseof infrastructuresuchaspower, railways, roadsandports.

2. Eurozonefinancialcrisisandslowdowninotherdevelopedworldmaycontinuelongerthanexpected. Slowdown inChinamay leadtooversupply,dumpingofsteelanddepressionofsteelprices

3. Social tensions & environmental concerns related with supply of water toindustrylikelytoposeabiggerthreatinfuture

4. Rising trend in wage rates in the context of inadequate growth in labourproductivityleadingtoerosionoflabourcostadvantageoftheIndianindustry.

5. Drop in efficiency level in general in Indianmanufacturing sector as awholewhich may impact steel demand growth at one level and higher capitalequipmentcostsfortheindustryatanother.

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AnnexureII

StrategicGoals:Parameter/Area Unit Existing

LevelStrategicGoal/Projectionby202526

1.Specific EnergyConsumption

G.Cal 6.3 4.5

2.CO2emissions T/TofCSteel

2.5 2.0

3.MaterialEfficiency % 93.5 98.04. Specific Make up WaterConsumption (Worksexcludingpowerplant)

T/TofCSteel

3.3 2.0

5.UtilizationofBOFslag % 30 1006.Share of continuous castproduction

% 70.0 95.0

7.BFProductivity T/M3/Day 1.9 2.88.BOFproductivity No.of

Heats/Converter/year

7800 12000

9.R&D expenditure/turnover

% 0.2 1.5

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AnnexureIIIGrowthScenario ProjectedDemandforFinishedsteel(MT) 201112 202526 CAGR(%) Implicit (ACTUAL) GDPelasticityGDP@6% 70.92 175 6.7% 1.11DemandforRawMaterialsforSteelIndustryat6.0%GDPGrowthRates

(202526)

6%GDPGrowthRateCrudeSteelProduction 192.5

MerchantPigIronforSale 14.3

SteelScrap 16.5

IronOre 292.1

PCI 7.0

CokingCoal 138.5

NonCokingcoal 49.7