Posted on 05 Nov 2024
The good news for the India growth story is that steel industry players, both domestic and foreign, have big-ticket plans for expanding capacities or setting up greenfield facilities. Posco, the seventh largest steel producer in the world, has recently signed an MoU with the JSW Group to set up a 5 million tonne (mt) integrated steel plant most probably in Keonjhar district of Odisha. A couple of years ago, the South Korean steel major inked a non-binding agreement with the Adani Group for an integrated steel mill in the port town of Mundra in Gujarat but the venture hasn’t progressed. It would be a second coming of sorts for Posco in Odisha as it was unsuccessful in its earlier efforts to set up a 12 mt steel plant in Paradip. Its partner JSW’s independent plans to establish a 13.2 mt plant in that state is on the land that was allocated to Posco before it suspended its project nine years ago. All in all, the steel industry has large-scale expansion plans aggregating to around 130 mt in the pipeline representing a bet on a $1.4-trillion infrastructure-led push for growth, which is highly steel-intensive in nature.
The steel industry is associated with sepia-tinted images of decaying rust belts or smokestack industries of a bygone industrial era. But this is far from true. Despite all the technological changes that have occurred so far — including the revolutions in materials — steel is not passé as its consumption still remains an indicator of industrialisation. With a facilitative policy environment, India could well become a global steel power in-the-making, doubling its crude steel capacity in less than a decade to 300 mt per annum. What is noteworthy is that the big players are also incorporating the latest green technologies, which will turn out highly advanced value-added steel products and reduce carbon emissions and reuse carbon.
Posco’s joint venture with JSW will focus on developing sustainable energy solutions. Its renewable energy project is for the captive use of the steel plant. Given the prospects of steel demand outpacing GDP growth, Posco remains interested in investing in the country despite frustrating efforts on its own to establish greenfield facilities. Posco’s experience in this regard is far from exceptional as Arcelor Mittal, too, had problems in establishing greenfield steel facilities in Odisha, Jharkhand, and Karnataka.
For such reasons, the policy environment must incentivise the building of greenfield steel factories, industrial parks, and other infrastructure. Such projects depend on a more stable policy and regulatory framework. Reform to free up the land and labour markets and improving the environment to do business in the states is imperative. Posco’s unsuccessful efforts earlier in Odisha had a good deal to do with a protest movement spearheaded by the Left, including opposition from domestic industry as well. To be sure, there were then many policy issues to be resolved at the state government level on handing over one-third of Odisha’s ore supplies to Posco. With better planning, this should not happen again. It is necessary to speed up forest and environment clearances for such steel projects to take off. Problems of land acquisition should not bedevil such projects. In this regard, it would certainly help potential investors if state governments build a land bank. As India needs more steel for its fast-growing economy, there is no escape from more greenfield facilities or expanding existing capacities.
Source:The Financial Express
