To lift per capita consumption from the present low of about 50 kg to at least 200 kg.
The mineral-rich states in the country will not be doing any service either to themselves or to the industry by making allocations of iron ore and coal deposits in small parcels to modest capacity steel mills by Monday’s global benchmark. Mining to be cost-effective and environment friendly is ideally done on some scale.
Though this is globally proven, records in recent years show the states here have allowed modest scale mining and deposit allocation for attracting investment in steel. This, however, is going against the grain of modern day mining and steel making. Chinese reforms in the recent times are a vindication of virtues of big scale mines and steel mills.
Asked if Tata Steel backed by decades of responsible mining will be inclined to move from raising iron ore and coal for captive use by its soon to be expanded 10-million-tonne steel mill at Jamshedpur to also become a merchant producer of minerals to meet requirements of units without mines linkages, managing director Hemant M Nerurkar responded positively. Merchant mining, according to him, can be considered on a cost-plus basis. This ideally should be done through a special purpose vehicle with a government agency as partner.
What at this point is engaging Nerurkar’s attention most is that the government at the federal and state level pursues a ‘uniform policy, which is open and transparent’ not leaving any scope for controversy in the allocation of mineral resources. “Ideally, once you have got the allocation and lease rights you should start mining in two years. But here, for one obstacle or the other, mining gestation period could run into seven to eight years,” laments Nerurkar. Hardly any mining project will escape protests by locals, mostly inspired by vested interests. Projects also get stalled by court cases while environment and forest clearances are not to be had easily. Many companies, including notables with enough money to spare, are facing the risk of cancellation of coal blocks for ‘unacceptable delays’ in mines opening. But, it will be wrong to put all the blame at the door of pulled up companies.
Nerurkar sees, in rapid iron ore mines development, an ‘essential enabler’ to growing the country’s steel capacity to anything between 300 and 350 million tonnes. “Our goal is to become a reasonably developed country. This will require of us to lift our per capita steel consumption from the present low of about 50 kg to at least 200 kg. We should be seeing a year-on-year steel consumption growth of up to 12 per cent,” he says. As for China, its steel consumption grew more than fourfold to 600 million tonnes in 2010 when crude steel production of close to 627 million tonnes gave it a 44.3 per cent share of the world output.
According to Nerurkar, given an efficient infrastructure to move raw materials into steel mills and then despatch finished products, seamless land acquisition procedures and adequate supply of skilled manpower, India cannot but be the next big hub for steel capacity growth. In order to give a leg up to capacity creation, Nerurkar wants the government to fast track some ultra mega steel plants on the lines of what is done for the power sector.
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“When I say ultra mega, I mean creation of modules of six million tonnes each. Tata Steel will be keen to build a plant in multiples of six million tonne modules,” he says. As the subject is engaging the attention of the government, the immediate focus of Tata Steel is to commission the first three-million-tonne phase of the six-million-tonne steel mill in Orissa’s Kalinganagar by 2013-14. The company has so far acquired 80 per cent of 3,500 acres of land needed for the project. The second phase should be ready by March 2016.
What is not to be missed is that the incremental capacity of three million tonnes at Jamshedpur and six million tonnes new capacity at Kalinganagar are all about flat steel. But the $1-trillion allocation for infrastructure development in the 12th plan, growing urbanisation and house building programmes will create new demand for long products.
But how will Tata Steel partake of the demand surge since it will not have any extra capacity for long products till the planned Chattisgarh mill is production ready? Since that is not happening in the near horizon, ‘we will be looking for other opportunities in this regard.’ Nerurkar is not, therefore, ruling out the possibility of Tata Steel’s inorganic growth in long products, ‘but it all depends on good takeover opportunities coming our way.’
There is some scaling down of Tata Steel’s 2020 capacity target. It is no longer 50 million tonnes, but more around 40 million tonnes. ‘Whatever that may be, we want a share of 20 per cent of Indian steel market in 2020,’ says Nerurkar.
Along with new capacity creation, the company is to go for significant value addition in areas where the country is import dependent. Like in alliance with Nippon Steel, it is to make 600,000 tonnes of auto grade steel by commissioning the country’s first continuous annealing and processing line.