While realists have already far outnumbered those still optimistic about India achieving 300 million tonnes per annum (MnTPA) of steel-making capacity by 2030-31, the steel ministry has conjured up another optimistic vision – it wants to create an additional 25-30 MnTPA of steel production capacity through the greenfield route in the next five years at an estimated INR 1.5 lakh crore investment. The aim is essentially to meet the future growing need for steel.
States & Steel PSUs As Enablers
With the state-run steel mills like the Steel Authority of India (SAIL) and Rashtriya Ispat Nigam Limited (RINL) in precarious financial conditions, greenfield units are not expected of them. Well aware of their balance sheets, the steel ministry, in its draft policy for promotion of greenfield investments in the steel sector, has, very aptly, reduced their role merely to that of enablers or facilitators. Its directive to these two units is also loud and clear – they should leverage excess land available to them by farming these out to private mills keen to set up greenfield units and evaluate the possibility of providing the new units with the principal raw material, iron ore, from captive sources. The government expects each greenfield unit to have around 4 MnTPA of capacity.
In yet another approach, states have been advised to follow one of the three models to enable the industry achieve the additional capacity.
First, states may identify a suitable land parcel and a mine for end-use and auction the combine to the end-users through a fair and transparent process. In the second model, the combined auctioning of an identified land by the states and a guaranteed long-term raw material linkage from state-owned PSUs can be explored. Lastly, joint auctioning of the land parcel and a minority 26% share transfer of the mining lease of a state-owned entity to the end-user (a private steel mill) for setting up the greenfield facility can also be weighed.
States have also been advised to facilitate clearances from state pollution control boards and provide logistics and utility linkages for the project. States could also explore the provision of potential incentives like state GST (SGST) rebate for a fixed period of time, capped at the capex value of the investments. All these options are being mulled to promote mega investments in the various states with potential steel-making raw materials like iron ore and coal and with enough scope for setting up logistics infrastructure for transporting iron ore and evacuating finished steel items.
The steel ministry will do its bit, including facilitating single-window clearances for forest and environment, liaising with different agencies for iron ore linkages, etc to help the industry in creating the additional capacity. India’s 142 million tonnes (MnT) capacity now is expected to be augmented by 28-30 MnT through the brownfield route by 2024-25. The ministry feels it will be imperative to create additional capacity through the greenfield route to meet the projected 160 MnT consumption by 2024-25. India consumed 99 MnT of steel in 2018-19.
The steel ministry believes the setting up of large greenfield steel plants would drive large investments which, in turn, would boost GDP and generate employment among others. Every tonne of steel produced typically leads to an impact of approximately INR 25,000 on the GDP and it may be mentioned that a
4-MnTPA plant is not exactly a small facility and only those players with enough financial muscle will only be more likely to undertake such investments.
Capacity In The Pipeline
Among the domestic private sector players, JSW Steel and Tata Steel are the two leading forces pursuing capacity addition, while Jindal Steel & Power (JSPL) is in consolidation mode.
JSW Steel intends to jack up its capacity to 40-50 MnTPA by 2030 from around 19 MnTPA at present. Tata Steel intends to take its capacity up to 30 MnTPA by 2025 from the current 18.5 MnTPA.
AM/NS India and Vedanta are the newcomers in the Indian steel space following acquisitions of insolvent Essar Steel and Electrosteel Steels respectively through the insolvency route.
AM/NS India has its plan of augmenting crude steel production capacity at its Hazira unit to 12-15 MnTPA over six years from around the current 7.5 MnTPA while Vedanta also wants to enhance capacity at Electrosteel Steels to 7 MnTPA in four years from the 1.5 MnTPA now.
Barring JSW Steel’s proposed 12-MnTPA steel plant on the land on which Posco had earlier proposed its steel unit in Odisha, all these capacity additions will mostly come through the brownfield route. ArcelorMittal had in possession the required land in Karnataka as in December, 2018 for its proposed 6 MnTPA plant. However, it has kept the project under review as of now, perhaps owing to the prevailing subdued market conditions. NMDC’s 3- MnTPA greenfield steel plant in Nagarnar is on the verge of being commissioned. POSCO might form a joint venture with RINL to set up a 5-MnTPA steel plant in Vizag.
Thus, though the plan to create an additional 25-30 MnTPA capacity through the greenfield route is not far from becoming a reality, the timeline may stretch by a few years. However, since states tend to benefit from the new steel units, the mineral-rich states like Odisha, Jharkhand, Chhattisgarh and Karnataka are expected to be a lot more proactive on this front in the coming days.
Also, many in the industry feel, such facilitations by the state governments would help the steel industry, especially players like ArcelorMittal, Posco and JSW Steel, who are in various stages of prospective greenfield ventures. If the procedure for access to raw materials is eased it would go a long way.
Under the Paris Treaty (COP 21), India intends to reduce the emission intensity of its GDP by 33-35% by 2030 from the 2005 levels. In order to achieve this target, India needs to find energy-efficient resources that are affordable and also available.
Natural gas is one such greener alternative available and for that, the Union steel minister, who is also in charge of the petroleum ministry, has to make sure that the newer steel plants get sufficient gas to run these units.
Encroachment-free land and iron ore are the prerequisites, but the industry also needs numerous other supports from the government – single-window clearances, prodding banks to lend to the sector, ensuring that no dumping of steel takes place in the country and creating higher demands for steel within the country.