Quick recovery of the steel sector in India has brought hopes that India may witness an economic turnaround much faster than the rest of the world. Mr PK Rastogi said that the renewed demand for steel consumption was coming mainly from infrastructure, automobile and white goods sector.
Q - The steel sector has begun to show strength recently. Can we call it an early indicator of the revival of the Indian economy?
A - Let me answer it with a historical perspective. The growth of steel has been at an average of 5% both in production and consumption for decades. But during 2002-07 the growth had nearly doubled to 10%, and to be precise, steel consumption had reached 13%. But there was a mismatch as consumption was increasing but production was not keeping pace.
Then came the global economic recession as steel industry felt the heat of the meltdown in October-December quarter. Consumption of steel dropped by 14% during that quarter. But we have seen a recovery now.
In April-July quarter this fiscal, production stood at 3.8% and consumption at 5.8%. This is quite encouraging as steel consumption has not improved much globally. So, there is definitely a revival of the sector, and if the growth is sustained we can achieve a double-digit growth this year. I feel, it's an indicator of better economic conditions.
Q - Where from the demand is actually coming?
A - Most of the new demand is coming from rural and semi urban areas. We have estimated that the demand for steel in construction activities are going down marginally now because of the monsoon season, but it has been compensated well by demands coming in from automobile, white goods and other engineering sectors.
Q - What's about 2010 Commonwealth Games?
A - Yes, it's also making a positive impact on growth of steel consumption in India. In China, steel consumption went up significantly thanks to the Olympics, and believe me, consumption level came down after the Games. Even in India, the completion of many of the infrastructure projects is linked to the Commonwealth Games, and in that sense it has been a driver of growth in steel consumption.
Q - What's about steel production? Why have many companies delayed their projects?
A - Steel companies have signed 225 MoU with different state governments, and projects are at various stages now. If you add all, it's an investment of 1100,000 crores. Yes, steel production has seen a little setback because of the global recession, but we will still be able to maintain our target of steel production of 100 million tonnes by 2012. It was a downward estimate as we increased the target to 124 million tonnes after seeing high consumption in 2007.
So far as individual projects are concerned, more of Brownfield projects are happening now. The economic slowdown had some impact on rolling out of three major Greenfield projects to be executed by ArcelorMittal and POSCO in Jharkhand and Orissa. The expected investment in these areas is about INR 130,000 crores. We hope, problems related to these projects will be sorted out soon.
(Sourced from CNBC-TV18)
