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Steel was under fairly strict regulatory framework till 1992 and the erstwhile policy was
to allocate scarce investment and infrastructure resources for optimum and planned development
of the industry and to make available this scarce industrial intermediate to the users at a
reasonable price. The basic purpose of the Industrial Policy (1948) was to manage a scarcity
driven market towards an announced objective of establishing a fair and equitable distribution of
this product and to keep it affordable as far as possible. The pre-reform steel market in India was
controlled in all relevant areas through direct and indirect way by Government. Direct
intervention took place in the form of government control over distribution of available steel
among consumers and indirect intervention took place in the form of price control and import
levies. The first Industrial Policy Resolution was adopted by Government of India in 1948
wherein steel industry was categorized as „Basic Industry‟. According to the policy government
took full control to set up integrated steel plants under public sector without disturbing the
existing plants in the private sector. Therefore, state ownership of steel plants in independent
India began in 1950s, as some integrated steel plants were established in the public sector and
growth of steel industry all over the country. But the outcome of the policy was not satisfactory.
The business houses preferred setting up steel production units closer to coastal trade hub and
markets in other parts of the country. In 1959, government formally approved setting up of
privately owned Electric Arc Furnace (EAF) based mini plants by amending the Industrial Policy
Resolution, 1956 because of shortage of steel in Indian economy. There were many problems for
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the newly set up units in respect of their capacity expansion during the controlled regime.
However they managed to produce significant amount of steel which would enable reduction of
Joint Plant Committee (JPC) was established in 1964 by Government of India under iron
and steel control order to regulate together with government the price of different steel products.
All major steel plants and railways became members of JPC. Price of steel used to be fixed by
JPC. Besides price policy, government also wanted to ensure iron and steel availability to
Steel industry in India was passing through a bad phase during the two decades of 1960s
and 1970s because general economic slowdown adversely affected the pace of growth. The
slowdown was caused by different factors like structural deficiencies, war with China (1962) and
Pakistan (1965, 1971), and entry of a huge number of refugees from the then East Pakistan
(1971), droughts (1965-66, 1971-72), currency devaluation (1966) and first world oil crisis
(1973-74) etc. Government of India introduced dual pricing system from 1972 onwards because
of impeded growth in the steel industry. As per this policy, prices of certain steel products like
heavy structural items, flats and railway materials were set low compared to the other steel
products. But the dual pricing system did not show any improvement in the growth of Indian
steel industry.
However, the bleak situation started to change from 1991-92 when Government of India
adopted a new industrial policy. The policy included the following key factors-
1. The iron and steel industry was removed from the list of industries reserved for the public
sector, and was also exempted from the provisions of compulsory licensing under the
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2. With effect from 24.5.92, iron and steel industry was included in the list of „high priority‟
industries for automatic approval of foreign equity investment up to 51 percent. The limit
3. Pricing and distribution of steel was deregulated from January 1992. At the same time it
was assured that small scale industries, exporters of engineering goods would get priority
for their requirements; priority was also ensured for North-Eastern Region and strategic
4. The import regime for iron and steel has undergone major liberalization moving
gradually from a controlled import system (import licensing, foreign exchange release,
canalization and high import tariffs) to a totally free environment of iron and steel import:
free from licensing, canalization and lowering of import duty levels. Export of iron and
5. Duties on raw materials for production were reduced which has resulted into reduction of
6. Freight equalization scheme was withdrawn in January 1992. However, with the coming
up of new steel plants in different parts of the country, iron and steel materials are freely
7. Levy on account of Steel Development Fund was discontinued from April 1994, thereby
In the progress of industrial development the government has also provided facilities to
(i) liberal import of melting scrap and sponge iron without import duty;
(ii) free diversification in all grades of carbon and alloy steels, including stainless steel,
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(iii) installation of captive rolling units;
(iv) addition of balancing facilities like continuous casting machines, heat treatment
furnaces, etc.
After passing through the initial phase of stabilization following economic reforms and
liberalization, the steel industry experienced and growth of 22 percent and 14 percent during
1994-95 and 1995-96, respectively (Mazumdar and Ghosal 2003,pg-65). Indian steel industry
faced a very critical situation since 1997 to 2001 because of severe slowdown in the Asian
economy which led to demand-supply mismatch with potential production capacity being much
higher than demand. Prices of a few types of steel products touched a 20-year low and most of
the Indian steel producers suffered heavy loss. New capacities became surplus and uneconomical
(Joshi 2006, pg-2). However, the new industrial policy gave a fresh boost to the industry and
performance of the industry improved with liberalized policy. The following table is presented to
Table: - 153 Growth of Indian Steel Sector after Liberalization compared to Pre-Liberalized
Regime (in percent)
The above table clearly indicates that the performance of Indian steel industry has
improved in the post liberalized regime compared to the pre-liberalized era. The Indian steel
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industry, with a production of about 1 million tonne at the time of independence, has come a
long way to reach the production of about 68.62 million tonnes in 2010-11. Moreover, the steel
industry evinces promising future growth, as major players in the industry have announced their
plans for significant investments in capacity expansion. Impressive development of Indian steel
industry keeping in pace with the global steel industry has also induced the government to come
up with National Steel Policy 2005. Drafted with the aim of establishing a road map and
framework for the development of the steel industry, the National Steel Policy, 2005 (NSP 2005)
was announced in November 2005. The salient features of the policy are as follows;
1. A proposed broad policy road map for the Indian steel industry taking into account issues
2. A long term goal for modern and efficient steel industry of world standards that can cater to
diversified steel demand. In order to achieve global competitiveness not only in terms of cost,
quality and product mix but also in respect of global benchmarks of efficiency and
productivity.
3. The goal of adoption of a multi-pronged strategy to move towards the above long-term
For this, the strategy, on the demand side, was to create incremental demand through
promotional efforts, creation of awareness and strengthening the delivery chain, particularly in
rural areas. As regards the supply side, the strategy was to facilitate creation of additional
capacity, removal of procedural and policy bottlenecks in the availability of inputs such as iron
ore and coal, higher investments in R&D and creation of infrastructure such as roads, railways
and ports.
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4. The NSP acknowledged the low per capita consumption levels of steel in the country,
especially in the rural areas and the need to boost steel consumption to improve quality of life
5. It also proposed support for developing risk-hedging instruments like futures and derivatives
6. It proposed strengthening of the existing training and research facilities available to the
domestic steel industry so as to provide suitable training programs especially for the
secondary small-scale units and also to collect and analyze data on important parameters of
the industry.
7. The policy emphasized aggressive R&D efforts to create manufacturing capability for special
types of steel, substitute coking coal, use iron ore fines, develop new products suited to rural
needs, enhance material and energy efficiency, utilize waste, and arrest environmental
degradation.
8. It acknowledged the important role played by the secondary steel sector in providing
employment, meeting local demand of steel in rural and semi-urban areas, and meeting the
country‟s demand for some special products, and sought to endeavor to provide the necessary
feedstock to these units at reasonable prices from major plants through the existing
9. The integration of the Indian steel industry with the global economy requires that it should be
protected from unfair trade practices, which become common especially during periods of
downturn. The policy, though focused on the domestic sector, also envisaged a steel industry
growing faster than domestic consumption, which will enable export opportunities.
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The National Steel Policy, 2005 laid down the long term Vision of Growth for the Indian
steel industry, which is on the threshold of undergoing a major change, in terms of number,
production, capacity and technology, among others. The industry experienced a remarkable
progress in 2005-06 and 2006-07. During that period many major changes came into the path of
the industry. Inter-firm competition increased because of better performance of the existing firms
in all the fields of competence and the resultant surge in competition for market share. Tata Steel
acquired European steel giant, Anglo-Dutch Company Corus, to strengthen its position in the
European market. Furthermore, due to expectant prospects of the industry in the near future,
newer secondary producers entered the market making competition even more intense down the
line. India has achieved the rank of being the fifth largest producer of crude steel in the world in
2010-11, besides being the world's largest sponge iron producer. In such an environment, JPC,
accredited with the ISO 9001: 2000 certification for its data/ information services, has been
pursuing a charter of jobs, keeping in mind the information needs of a rapidly changing industry.
The focus of the policy would therefore be to achieve global competitiveness not only in terms of
cost, quality and product- mix but also in terms of global benchmarks of efficiency and
productivity. This will require indigenous production of over 100 million tonnes per annum by
2019-20 vis-à-Vis the 2010-11 level of 68.62 million tonnes. This implies a compounded annual
growth of 5.4 percent per annum. In case of foreign trade, India is still a net importer of steel.
The import of steel has to reach 6 million tonnes in 2019-20 but in 2010-11 total import stood at
6.66 million tonnes implying negative compound annual growth rate of (1.1) percent. The target
export is 26 million tonnes in 2019-20 from the level of 3.64 million tonnes in 2010-11
projecting compound annual growth rate of 24.4 percent. Therefore, to accomplish the strategic
goal Indian steel industry has to improve its performance in the area of production, consumption
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and foreign trade. Consumption of steel can be defined as production plus imports minus exports
and adjustment of stock. The following Table-154 shows the figures and the projected
compounded annual growth rates for production, consumption, imports and exports for 2019-20
Table- 155 Overview of Policies Regarding the Iron and Steel Industry of India (1948-2010)
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