Has anyone said this before: Democratisation of steel? What has arguably led Steel Secretary P K Misra to give the call, nothing short of clarion in nature, is to take the versatile metal to the common man by removing its ‘elitist’ tag. Our steelmakers, both in the government domain and private sector, should take the message by heart and see that the steel needed by the common man becomes affordable.
Misra’s message is to be read in more than one context. First, as the stated goal is to bring the country’s per capita consumption of steel from about 50 kg now to close to the world average of 182 kg, the largely unexplored rural market has to figure prominently in steelmakers’ sales strategy. A climb to the world average use level self-reliantly will, as Misra points out, require our building crude steel making capacity of 300 million tonnes. A tall order since at this point our capacity is around 75 million tonnes and our production in 2010 was 66.8 million tonnes.
There is more than one view as to the size of per capita use of steel in rural India, especially following the recent enquiry by Joint Plant Committee. Whatever that may be, chairman of Steel Authority of India CS Verma recommends targeting the rural segment of the market as a prop for creation of new steel capacity. The principle of democratisation of steel espoused by Misra has an in-built element of dialectics.
This leads us to the next context. Speaking at Metal Bulletin’s Indian steel conference, Misra said steel was a highly ‘resource intensive industry’ — for making one unit of the metal, 1.6 unit of iron ore and 1 unit of metallurgical coal are required — and shortages and smart price rises of raw materials in the past few months had ‘significant implications for the steel industry,’ particularly because of the finite nature of the minerals. BHP Billiton CEO Marius Kloppers bets heavily on iron ore prices staying strong for nothing less than two years. He says, “simply put... there’s not a substantial amount of new capacity coming on, and it’s more an issue of the supply side rather than the demand side.”
Globally, steelmakers are not looking for much relief from the current highs of $190 a tonne of iron ore till mine expansions are through in 2014 and the following year. Thanks to floods that raged since November shutting coal mines and throwing rail links out of gear in Australia’s Queensland and world crude steel production rising 5.3 per cent in January to 119 million tonnes over the same month last year on the back of a record 2010 output 1.414 billion tonnes, metallurgical coal has become particularly pricey. Steelmakers are, therefore, bracing themselves up for up to 20 per cent rise in coal prices for the April-June quarter.
Misra says the fall out of all this will be in the nature of squeezed profitability of steelmakers, price inflation of consumer products made of steel and ‘compromised competitiveness of the steel industry.’ He has reasons to be uncomfortable with the insecurity that ‘unpredictable prices and shortages’ of raw materials create among investors who may put big projects on the back burner. But how in a situation like the present one do steelmakers take forward the process of democratisation of the metal use. Is this to be done by using lower volumes of raw materials, including energy for making a unit of steel and through productivity improvement?
Is there scope for cross subsidising the steel products for use by aam admi? This is the case with electricity where the states allow farmers to use energy at a big discount to normal tariff. Similarly, 10 per cent of sugar production is drafted by the government at highly subsidised rates for distribution among BPL people. As for steel, we will get the answer if the government decides to take the idea floated by Misra forward. While affordability is important when the issue is penetration of rural market, yet another challenge is to educate villagers about the positives of using steel in building houses and making farm implements.
Villagers are not to take the trouble of travelling long distances for steel. They will have the motivation to use steel if the material is available virtually at their doorsteps. Verma says SAIL dealer network covers all districts. But this will not be enough to make a major impact on demand generation in our countryside. For that to happen, dealers will have to see that some common varieties of steel are available off the shelf in rural heartland.
Steel use democratisation is what equity and social justice demand. Misra wants companies planning to build new steel mills to offer ‘acceptable compensation packages’ to the affected people in conformity with equity principle. At the same time, project clearances will come through quicker than is the case now provided these are not found remotely in violation of environment and forest laws. Disturbingly, however, some NGOs want to be dispenser of justice. Misra is right that for the government the challenge is to strike a fine balance between growth and environment protection.
