'Good environment for steel growth must be maintained'

Mon, May 12 05:40 PM

Industry body Assocham on Monday asked the government to maintain investment friendly environment for the steel industry to enable fructification of planned investments and capacity expansions to meet the demand -supply mismatch, which has crossed over 6 per cent.

It is imperative to maintain investment friendly environment in order to ensure that planned investments are actually made and capacity gets enhanced as quickly as possible, Assocham President Venugopal Dhoot said in a statement.

According to the corporate announcements tracked by Assocham Investment Meter (AIM) over the quarter ending March 2008, the industry majors lined up an investment of Rs 89,240 crore in the steel sector during the three months.

While the steel production grew at only 5.2 per cent in 2007-08, consumption grew at 11.72 per cent. The total production of finished steel in the country was about 55.26 million tonne in 2007-08, against consumption of almost 51.80 million tonne, the study said.

Even if two-third of the investment announcements materialise, the resultant capacity expansion would be instrumental in easing the pressure on prices in the long run, Dhoot said.

The sector is working to hike its capacity by 31 million tons to meet the fast growing demand, the statement said. Steel prices increased by over 30 per cent in 2008. More than expected growth in demand coupled with rising raw material prices has pushed up prices, it added.

For the 11th Five-Year plan, the demand of steel is expected to be 66-70 million tonne in 2011-12. The meeting of increasing demand at reasonable prices would depend on the extent of capacity expansion, it said.

The capacity augmentation plans announced by the industries during January-March 2008, may increase the production capacity to about 85 million tonne, it said.

The study said iron ore and coal rich states like Orissa attracted almost half of the total capital expenditure announcements made in the steel sector with planned investments of about Rs 45,000 crore, it added.

Other destinations chosen by the steel companies to build steel plants includes Chhattisgarh, West Bengal and Jharkhand. The amount of capital expenditure involved is pegged to be around Rs 16,000 crore, Rs 11,900 crore and Rs 7,000 crore respectively, the study said.

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