The Hindu Business Line : Major strides in steel

For centuries India has been producing steel, the best proof of which is the famous Iron Pillar of Delhi, built by Chandragupta II Vikramaditya in the fourth and fifth century AD.

Even in the ancient days, Indians manufactured steel by using charcoal. Coal was discovered only in 1774, and mining started between 1820 and 1830 at West Bengal's Asansol-Ranigunj area.

Organised steel production started in West Bengal with the foundation of Bengal Iron Works by James Erskine in 1870 at a place called Kulti (then better known as Kendwa) in Bardhaman district. By 1875, operations started with top-open furnaces and poor quality iron ore and raw coal were used instead of coke. By the first decade of the 20th century, Kulti produced steel using open-hearth furnaces. However, the efforts did not survive the competition from imported steel. So, though Kulti was the first plant to produce both iron and steel, the credit goes to the Tatas as they did it on a continuous basis in a village called Sakchi in today's Jharkhand.

Tatas' entry

In 1907, Tata Iron & Steel was floated and soon it entered the equity market to raise Rs 2.32 crore, which included Rs 1.5 crore worth of ordinary shares, Rs 75 lakh of preference shares and Rs 7 lakh of deferred shares. Around 8,000 investors participated in the issue. Construction started in 1908 and, by the end of 1911, the plant produced its first cast of pig iron. Within three months it started producing steel.

Meanwhile, the Kulti plant kept on changing hands. At one time, it was owned by the Government's Public Works Department as the concept of public sector unit was yet to germinate. By the end of the 19th century, ownership of Bengal Iron Works went to Sir R.N. Mookerjee and Sir Acquin Martin.

By 1918, Burn & Co, a British managing agency, floated Indian Iron & Steel Co (IISCo). The second steel plant in Bengal was built in Burnpur, adjacent to Kulti, by G.H. Fairhurst. In 1936, Bengal Iron Works was merged with IISCo. Three years later, Steel Corporation of Bengal established another steel plant at Burnpur adjacent to IISCo. Later, the two were merged and, in the early 1950s, it was managed by Martin Burn. Total capacity increased to one million tonnes and IISCo became a blue-chip with its shares listed on London Stock Exchange.

SAIL's story

SAIL's (Steel Authority of India Ltd) origin goes back to 1954 when Hindustan Steel Private Ltd was incorporated - its shares were held by the President of India - for managing the plant that was coming up in Rourkela. Preliminary work at Bhilai and Durgapur steel plants were carried out by the Union Iron and Steel Ministry, but by 1957 it went to Hindustan Steel's supervision.

In 1964, Bokaro Steel Ltd was floated. SAIL was incorporated in January 1973 as a holding company for managing the five integrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel Plant. Later, in 1978 it was restructured as an operating company. At present, SAIL is India's largest steel manufacturer with an annual production of 12 million tonnes per annum (mtpa) and, according to its Corporate Plan, this is being increased to 22.5 mtpa by 2010.

Future plans

With China and India emerging as major consumers of steel, the action has now shifted to eastern India, which has huge reserves of raw materials such as iron ore, coal and other natural resources. The region has lately attracted global steel majors such as Mittal Steel (now Mittal Arcelor) and POSCO, the world's fourth-largest steel producer.

The projected growth in GDP, along with buoyant demand from the infrastructure, housing, real estate and automobile sectors, has led to a sustained increase in the domestic demand for steel. India's per capita steel consumption at 33-35 kg - compared with China's at more than 200 kg - has invigorated companies to set up new capacities for tapping the potential demand.

Tata Steel proposes to increase its steel making capacity to 33-34 mtpa by 2015 at a cumulative investment of Rs 100,000 crore. Besides, augmenting the capacity of its existing plant at Jamshedpur from 5 mtpa now to 10 mtpa at an investment of Rs 11,000 crore, it plans to set up a 12-mtpa greenfield project in Jharkhand at an investment of Rs 42,000 crore.

It has also announced another 6-mtpa greenfield plant in Orissa and another 5 mtpa capacity unit at Chhattisgarh. Mittal Steel has also announced a 12-mtpa greenfield steel project at Jharkhand at an investment of Rs 40,000 crore.

Orissa initiatives

Neighbouring Orissa has signed around 45 memoranda of understanding (MoU) for setting up steel capacities aggregating 60 million tonnes within the next few years. POSCO has announced the setting up of a 12-mtpa steel plant near Paradeep in Jagatsinghpur entailing an investment of $12 billion (Rs 51,000 crore). The project will have an integrated steel plant and will also develop infrastructure and iron ore mines. The projected economic benefit of the POSCO project over the next 30 years has been pegged at $278.6 billion.

Mittal Steel has also proposed to invest Rs 40,000 crore in a 12-mtpa greenfield steel plant in Orissa. Other players who are setting up steel capacities in Orissa include Tata Steel, Jindal Stainless, Jindal Steel & Power, Bhushan Steel, Uttam Galva, Visa Steel and Welspun, among others. On the whole it is a real boom time for eastern India's iron and steel sector. If all the projects that are already announced come up, then this region will become one of the important global hubs of steel production. However, for that to happen, state governments in the region have to improve infrastructure substantially.