Delay in land, iron ore mines cause steel output to grow at 4.2 %

New Delhi: Delays in allocation of land and iron ore mines for setting up new capacities has caused India's steel output to grow at a modest rate of 4.2 per cent even as demand has clocked a growth rate of 11 per cent.

In April-August 2008, output grew 4.2 per cent, down from 5.2 per cent during 2007-08 and 12.8 per cent in 2006-07, Union Steel Minister Ram Vilas Paswan said at the 22nd meeting of Steel Consumer Council.

“Mismatch in the rate of production and consumption of steel is a cause for concern… as a result of the overall mismatch, the country has become a net importer of steel in 2007-08 and the same trend continues this year as well,” he said.

Demand during the April-August period rose 11 per cent as against 10 per cent in the previous year, he said. 'The Indian economy rests on strong fundamentals and I am confident that domestic demand will continue to grow at a healthy rate, despite a global slowdown,' he added.

Paswan said steel output is likely to stagnate unless new capacities come on-stream. India aims to produce 124 million tonne of steel annually by 2011-12, more than double its current production capacity of about 56 million tonne. 'I hope we will be able to meet this target,' Paswan said.

The widening gap between demand and production means more imports that make government uneasy, as it can lead to spurt in domestic prices of steel and other related goods and commodities, if global prices are trending higher.

Indian steel companies have been following an import-parity based pricing that makes domestic prices exposed to swings in global prices. Steel ministry has projected a demand growth of 12 per cent this year.

“Slowdown in real estate may pull down demand marginally,” said P K Rastogi, Union steel secretary. Paswan today convened a meeting of steel producers and consumers to deliberate over issues, such as pricing, hoarding, supply, and duties.

On complaints from various user groups, Paswan urged all steel companies to be transparent in pricing and ensure end-consumers of steel get prices prescribed by the companies.

Leading producers have blamed traders for charging high retail margins on steel products.