The Steel Authority of India : An Indispensable Wind In the Sails Of India’s Economic Growth

The mother company of today’s Steel Authority of India Limited (SAIL), one of the top steel manufactures in the world, was Hindustan Steel Limited (HSL) established in 1954, exclusively designed for the management of the only existing steel plant then in Rourkela. After the completion of the Bhilai and the Durgapur steel plants, HSL was vested with the authority of the overall management of these two new steel plants. This was followed by the completion of a new steel company, Bokaro Steel Limited (Bokaro Steel Plant). All these plants were merged in 2006 along with IISCO to form the Delhi based Steel Authority of India Limited (SAIL). SAIL is among the top 25 steel producing companies in the world producing 13.5 million tonnes of crude steel (as per 2012 statistics).


A public sector undertaking (and one of the fastest growing public sector units in India), SAIL is owned by the Government of India with its major plants in Bhilai, Bokaro, Durgapur, Rourkela, Burnpur (Asansol) and Salem. It is also an employment intensive sector currently employing in excess of 1.2 lakh people. SAIL is also empowered to function as a corporate, ranking among the top five profits making corporates of India. Other wings of SAIL include Research and Development Center for Iron and Steel (RDCIS), Center for Engineering and Technology (CET), Management Training Institute (MIT) and SAIL Safety Organization (SSO).


According to the current statistics, there was a 36% increase in the steel production capacity of India from 2009 to 2012, touching the 90 million tons per annum mark in 2012, ensuring India’s position in the global crude steel production scenario as the 4th largest crude steel producer for the last three consecutive years. The domestic steel market is also expanding rapidly as evident from the fact that the per capita steel consumption has increased to 60kg in 2012. According to a press release by C.S. Verma, the Chairman of SAIL, steel export is expected to double, touching a figure of 25 billion rupees (US$ 409.27 million) in this fiscal year. The further ongoing expansion plans of SAIL in the current fiscal year, involving a budget of Rs 120 billion and the consistent efforts of the state owned steel manufacturers to enhance their production capacity by 17 million metric tons by 2014 was also disclosed in the press release.


Coal (coking coal) and iron ore are the two most important raw materials necessary for the steel industry. Of these two raw materials, India has rich deposits of iron ore but the coking coal is mostly obtained through imports. Both SAIL and the Rashtriya Ispat Nigam Limited (RINL) had undertaken expansion programs to enhance their steel capacity production which are almost on the verge of completion. Completed expansion programs will definitely increase the demand for raw materials and the expected increase in demand is calculated to be about 39%. If we further expand and analyze this 39% increase in the demand of raw materials, RINL’s iron ore demand only will see an increase of 39.39%, which will amount to 9.2 million ton (MT) in 2015-2016.


As per a statement issued by the SAIL Chairman C.S. Verma, SAIL will doubtlessly witness an increase of 33.33% in the demand of coking coal in 2015-2016 amounting to 19.2 MT while the increase in demand for iron ore will amount to 36.80 MT (a net increase of 32.42%) as compared to the current requirements of 27.79 MT of iron ore and 14.40 MT of coking coal in total inclusive of its major factories at Bhilai, Bokaro, Durgapur, Rourkela, IISCO, Burnpur (Asansol) and Salem. According to a statement by Verma, the proposed budget for March 2013 for the capacity enhancement of SAIL was Rs 72,134 crore of which Rs 44,112 crore has already been invested in the expansion plan.


According to the C.S. Verma, “Today we have 14mtpa capacity. By the end of this year, our capacity will be 19mtpa. By next year our capacity will be 24 mtpa. Then, we are having our vision 2022, when the 13th Five Year Plan ends, we will be having our capacity escalated to 50mtpa”. Regarding the expansion plans, he added, “All these expansions would be at our existing facilities barring Sindri where we plan to set up a 5.6mtpa Greenfield steel plant.” He further added, “However since most of the expansions will be carried out in existing plants, expenditure will be a little less than what is considered as the thumb rule. It would be around US$ 20 billion”. Once the goal of increasing the production from 14mtpa to 24mtpa is achieved, SAIL will embark on the next phase of expansion with the target of increasing the production to 50mtpa. As for the Sindri plant, the execution of the plan is only being held up because of the delay in acquiring 4,000 acres of suitable land free from any encroachment issues. The four years project for the proposed plant has already secured the Cabinet’s approval of the necessary grant of Rs 26,000 crore.


The Raw Materials Division (RMD) of SAIL is now focusing on the mining sectors for an increased production of iron ore in order to meet the upcoming demands of the industry. The mines at Bolani, Barsua and Kalta in Orissa and Meghahatubure, Gua, and Chiria in Jharkhand under the direct captive supervision of RMD has already been endorsed an investment of Rs 72,000 crore from SAIL to modernize the current infrastructure in an attempt to increase the yield of iron ore from 13.82 million tons to 23.46 million tons to meet the future requirements with an additional investment of Rs 950 crore for the Meghahatubure mines to increase its iron ore yield from 3 million tons to 6.5 million tons per annum. However, the attempt to reduce import expenditure of coking coal, SAIL’s endeavour to acquire coking coal from the Jharia coalfields (with an estimated coal reserve of 96.78 million tons) in Jharkahand remains an uncertainty. Complications regarding tenders, environmental issues, political issues and the erratic behaviour of the prospective mine developers-cum-operators is creating a bottleneck for the tapping of the coal resources in Jharia, Jharkhand.


For 2012-2013, the production figure of SAIL surpassed the annual targets for all areas of production. The expansion plans of SAIL when fully materialized will create more employment in our country. Apart from export there is tremendous scope of development in the domestic market itself as evident from the fact that the per capita consumption of steel in India is only 55 kilos to 60 kilos as compared to China where the per capita consumption of steel is 459.8 kilos and the global average consumption being 200 kilos. It is estimated that by 2020 India’s steel production capacity will be a staggering 150mtpa and undoubtedly this will draw exhaustive investments from both the private and public sectors.