New steel capacity still on paper

Of 60 million tonnes announced, only 7.2 million tonnes off the ground.

Over the last couple of years, India's steel makers have announced a rash of new projects which, if all goes well, will by 2012 add a staggering 60 million tonnes to the current steel-making capacity of 37 million tonnes.

The reality, however, is that only two projects "" with a combined capacity of 7.2 million tonnes "" have got off the ground. Since the investments have been planned by the Who's Who of India's steel business, the question arises: what has gone wrong?

The projects, announced by Tata Steel, JSW Steel, Jindal Steel & Power, Essar Steel, Ispat Industries, Posco India, Mittal Steel India and Jindal Stainless, are scattered among the mineral-rich states of Jharkhand, Orissa, Chhattisgarh and Karnataka.

Tata Steel is in the process of placing orders for its Kalinganagar project in Orissa and Jindal Steel & Power has already placed orders of around Rs 2,000 crore for its Orissa project. Placing orders is significant because iron ore mines will be allotted once 15-20 per cent of the investment is made by a company.

Most of the companies are in different stages of land acquisition. In Jharkhand, the government is yet to announce its rehabilitation policy, which is linked to land acquisition. The previous Arjun Munda government had approved a rehabilitation policy, but it is yet to be notified.

Tata Steel, JSW Steel, Jindal Steel & Power and Essar Steel have identified land and are now awaiting the policy. Mittal Steel has identified land and will announce its site shortly.

In Orissa, Tata Steel, Jindal Stainless, and Jindal Steel & Power have acquired most of the land required for their projects. Essar Steel sources said the state government was in the process of acquiring land for the project.

Posco, of course, is facing serious problems from local farmers, social activists and politicians in acquiring land and has had to scale down its requirement. The project, delayed by several months, is awaiting intervention from the Prime Minister's Office.

JSW Steel is contemplating setting up a 10 million tonne plant in Orissa while Ispat Industries, which is eyeing greenfield capacity in Karnataka, has received approval from the state government for land.

In Chhattisgarh, public hearing is on and both Tata Steel and Essar Steel have identified land. While the companies have made some progress on land acquisition, two years since a plethora of initial agreements were signed, there has been no headway in the allocation of mines.

According to a report by the Associated Chambers of Commerce and Industry, India will produce around 75 million tonnes of steel by 2012 and 200 million tonnes by 2020. The growth will require 12.5 billion tonnes of iron ore by 2035.

However, iron ore production in 2005-06, at 165 million tonnes, accounted only for a fraction of this. Around 90 million tonnes were exported.