The Steel Ministry estimates that around Rs 2.5 lakh crore investment will be required in the next five years to raise the domestic steel making capacity by 60 million tonnes per annum (MTPA).
The Working Group on steel sector for the 12th Five-Year Plan assessed that steel production of the country will go up to 149 mtpa in 2016-17 from 89 MTPA likely in FY12.
The steel making capacity of the country stood at 78 MTPA in FY11.
"The requirement of financial resources to support an additional capacity creation of about 60 million tonnes will be approximately Rs 2.5 lakh crore during the 12th Plan (2012-17)," the Group, headed by Steel Secretary P K Mishra, said in its final report.
The committee expects country's steel making capacity to go up to 104.66 MTPA in 2012-13, 119.01 MTPA in 2013-14, 129.39 MTPA in 2014-15, 140.57 in 2015-16 and to 149 MTPA in the final year of 12th Plan Period.
It also expects Posco to start production from its Orissa plant during 2016-17 with four MTPA capacity.
Warning that securing such a large amount of investible funds at a resonable cost would be a challenging proposition, the committee said it was impertaive to review steel-related sectoral caps by banks and consider easing of norms relating to External Commercial Borrowings (ECBs).
"Special purpose long-term financing facility may also be created to finance huge investment in new steel plants," it said.
The Committee estimates the requirement of iron ore and coking coal to feed the additional capacity will increase to 206.2 million tonnes and 90.2 million tonnes respectively from 115 million tonnes and 43.2 million tonnes now.
It expects domestic steel demand to go up by an annual average of 10.3% to 113.3 mtpa in the final year of the 12th Plan Period from 65.61 mtpa in FY11.
"It is likely that in the next five years, demand will grow at a considerably higher annual average rate of 10.3% as compared to around 8.1% growth achieved during the last two decades (1991-92 to 2010-11)," it said.