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[Music] [Applause] hello and welcome to study IQ in this lecture we will see what are the concerns faced by the steel industry in India concerns faced by steel industry in India before we move on to the topic let us quickly have an overview about the steel industry in India India is the third largest producer of crude steel after China and Japan and it aims to become the second largest steel producer bypassing Japan by the year 2030 at present we are the third largest producers of crude steel in order to promote the steel production in the country the government has imposed zero export duty on steel but the GST on steel is eighteen percentage the major steel plans of the country are located in the states of Orissa Jharkhand West Bengal Karnataka Chhattisgarh Tamilnadu Vizag and Maharashtra so these are the important states which needs to be noted like you should have an idea regarding which all states have the important steel plants in the country the per capita consumption of steel in our country is merely 68 kilogram there is the global average is 200 kilogram so per capita consumption 68 kilogram global average 200 kilogram through there is a gap now what is the issue here the demand for steel all over the world is growing so the demand is increasing but the production is coming down production coming down with this will lead to a supply and demand gap and if India properly utilized all its resources we can fill this global gap of steel production so there is emerging global gap in the steel production because of increased demand on one side and reduced supply on the other side and if India uses all of the resources to its full advantage we have a fair of capturing the global market in the steel production industry now let us see what are the major concerns of Indian steel production industry the first and the most important thing that India should be concerned regarding the steel industry is the reduction in the rate of foreign investments in the steel industry of our country the first one reduction in the rate of foreign investments in the steel industry of our country let us closely analyze what are the reasons for the reduction of foreign investment in the steel industry the most important factor which has led to a decrease in the foreign investment is the business environment of our country the global image of India regarding the business environment has come down if we take the example of the vodafone case example order phone case a global image was created that india lacks commitments to contracts and laws in India can change anytime so such kind of similar examples has given a negative image about the business environment of India coming to the steel industry a very good example is the example of POSCO which had signed a memorandum of understanding with the Government of India in the year 2005 in the year 2005 an MOU was signed with the Government of India according to the MOU Bosco agreed to invest 12 billion dollars for a steel plant in Orissa but it refrained from this process later it refrained from this process and later the Post Co agency said that this was because of the unreliable policy environment in the country so this was because of unreliable policy environment prevailing in India so this is one major reason why foreign investments especially in the steel sector is coming down in our country another thing to be noted under the foreign investments is that the FDI in the steel industry is less than the FII what is the difference betwee FDI and FII if they refers to foreign direct investment it means that a multinational company has to invest in another country in the form of direct capital in the form of infrastructure in the form of assets it is for long-term so if FDI is for long-term an immense he has to make investments in infrastructure of a country which cannot be taken back in a short period of time it is for a very long time and coming to FII foreign institutional investment foreign institutional investment means a foreign company will make investments in the share of another country for example if a US company is making investments in the shares of an Indian company it is known as foreign institutional investment and what is a speciality of this foreign institutional investment foreign institutional investments can be taken back any time it means that they are highly volatile so this can be withdrawn any time and when they say that the foreign direct investments in the steel sector is less than the foreign institutional investment what does this mean it means that foreign companies are not interested to invest in India or Indian steel industry for a long period and this is because of the business environment of our country business environment so when a foreign company makes investment in foreign institutional investment of a country or shares of a company in India it means that the company can withdraw at any time because the foreign companies are concerned about the unreliable policy environment in our country they prefer to make investments in foreign institutional investment or FII not in FDI this is an important thing to be noted so FDI in the steel industry is less than FII another thing to be noted here is that currently the India steel capacities 125 million ton 125 million ton the current steel capacity of India but the target of India is to achieve 300 million tons production by the year 2030 in another 12 years India tries to achieve the target of 300 million tonne this means that 175 million ton of steel production must be increased or added 175 million ton steel production must be added to the current level and if this target has to be achieved by 2030 around 30 million tons of steel production must be added annually so per year 13 million ton of steel production must be added to the present capacity only then we will be able to achieve the target of 300 million tonne by 2030 for producing 1 million ton of steel around 60 billion investment is required and in order to produce 175 million ton of steel we require an investment of around 780 billion now the question is can India itself unless 780 billion for steel production in the country now for a developing country like India it is impossible to invest 780 billion in steel industry alone so what is the solution the only solution left out is to attract foreign investment in the steel industry of our country solution is foreign investment and we said that foreign investment is coming down because of our business environment we also have make in India initiative so making India initiative also targets steel production within the country or domestic production of Steel so this also will require the help of foreign investment if we have to achieve the targets of making India also so foreign investment is one thing that we cannot forego so a decrease in the rate of foreign investment a serious is a very serious cause of concern for the steel production industry in the country another important cause of concern for the steel industry in our countries the increased cost of production of steel an increase in cost of production of the steel and this increase in cost of of the steel is majorly due to two factors oneness a high cost of transportation high cost of transportation and the second one due to lack of technology let us see one by one taking high cost of transportation according to certain reports that the cost of transportation in the steel industry in India is almost three times that of global average and the reason for this is that we depend on railways for steel transportation there are two problems with railways oneness congestion and the second honest expense congestion is related to the problem of our utilization of the capacity of the Indian Railways so congestion is one problem and the second one is expense the cost of fright expense in the railways is very high the Indian Railways actually compromises the rate of passengers that is the passenger fare with that of flight expenses that means the passenger fares in Indian Railways is very less but the flight expenses of Indian Railways are very high and this has led to increased cost of production in the steel one reason is cost of transportation and the second reason lack of technology the Indian steel producing companies still use outdated technologies and if we need an improvement in the technology a collaboration with the foreign partners is necessary so we have to adopt international standards and global technology for that not only investments but technology from outside the country is also very necessary and to attack this the government should adopt business friendly environment in this country to attract foreign investments and also to bring in foreign technology into this industry another course of concern of the steel industry in India is the over reliance of call for steel production we rely on coal for the production of steel this will have serious implications on the environment friend already we are over exploiting this resource so in the future this can add on to the carbon foot prints and we'll have serious implications on the environment and which needs to be addressed properly another course of concern is that the per capita labor productivity is less per capita labor productivity of the Indian steel industries is less another course of concern in the Indian steel industries is that there is a serious issue of under utilization of capacity under utilization of capacity and this has led to an increase in the cost of production of steel so if the resources are not utilized properly especially the manpower it will lead to an increase in the cost of production and many factors have caused the under utilization of capacity which includes strikes labor disputes improper monitoring mechanism etc another cause of concern which we have already discussed is technology or lack of technology in the steel industry of India so these are the major concerns relating to the steel industry in India now let us see what are the government initiatives taken in order to tackle the concerns in the steel industry of India government measures before going on to the government measures you must understand that government is the one who has to do the work of a facilitator so the aim of the government is to facilitate facilitate the industry it means that the government will have to lay down policy guidelines and establish institutional mechanism policy guidelines institutional mechanisms this policy guidelines and institutional mechanisms are necessary for creating conducting environment which will help in improving the efficiency and the performance of this industry so government is to provide policies and institutional mechanisms which will promote the growth of this industry by increasing the efficiency and performance of this industry so now let us see what are the government initiatives the first one is the national steel policy national steel policy 2017 this is an updated of the national steel policy 2005 so already in 2005 we had a national steel policy this is an updated wish version national steel policy provides a broader roadmap to achieve long term growth in the steel industry by the year 2030 we have already discussed the target of the government by the year 2030 is to increase the production of steel by 175 million tons so 175 million tons production will be added by the year 2030 so the national steel policy gives broader guidelines for achieving this target by 2030 this national steel policy addresses the concerns in both demand and supply side that means in the beginning we said that the demand and the demand for steel in India is very less than the global average demand for steel so this national steel policy not only addresses the issues with the supply side but it also addresses issues regarding the demand side of the steel another initiative from the side of the government was that it has provided for a policy which will give preference to domestic manufacturers of iron and steel so the policy of the government to promote domestic manufacturers of INL steel this will also boost the India's make in India initiative we know that making India is a flagship program of the gun and the government is giving so much of importance for making India program so the policy of the government to procure or to give preference to domestically produced steel will give a boost to make in India program of the government in the year 1992 the steel industry was be controlled and be licensed in the year 1990 to be controlled and D licensed it means that the government took away its control from the steel industry and D license means abolition of licensing from the steel industry also in the year 1992 the price regulation of this industry was abolished price regulation was abolished it means that when price regulation is abolished the market will determine the prices of that particular commodity so in case of steel in 1992 when the government abolished the price regulation it means since then the demand and supply forces in the economy that is a demand for steel and also the supply of steel this demand and supply forces decides the price of the steel in the market so the price is determined by demand and supply forces in the market another government initiative was the creation of inter-ministerial group IMG under the Ministry of steel and this inter-ministerial group was chaired by the secretary of the steel chairman secretary of steel and the aim of this in the ministerial group was to monitor and coordinate major steel investments in the country monitor and coordinate major steel investments in the country also there is no export duty for steel no export duty this means that the domestic manufacturers are promoted to produce steel in the country they can export their commodity or steel with zero export duty so this was also to increase the production of steel in the country so these are the major government initiatives in order to increase the production of steel in the country we have seen the concerns of Indian steel industry also we have seen the government initiatives now let us see what are the solutions to address this concerns of the Indian steel industry solutions an important solution from the side of the government can be to implement policies and institutional mechanisms institutional mechanisms which will attack foreign players for long term investment so we said that foreign investment is necessary not only in terms of capital but all in terms of technology so the government must make its policies and institutional set up friendly for the foreign investors to make investments in our country this is one viable solution for increasing the production of steel in the country so when foreign investment increases we will be able to meet our target by 2030 to increase the production of steel and to become the second largest producer of steel in the world it will also create lots of employment for our country and while attracting the foreign investment the government should ensure that the foreign investments are for long-term we said that the foreign direct investments in steel is less than foreign institutional investment so government should give more focus on FDI which is long-term so this must be the agenda of the government another solution would be to explore new areas for the procurement of raw material so exploring new areas for raw materials for example clean energy sources like the coal gasification examples called gasification this comes under low cost and also less carbon footprint it means that the end but it means that the environmental concerns will come down so the government should take initiative to explore new areas of raw materials which will have a positive impact on cost as well as on the environmental front another important thing which we can look into is the utilization of Indian coastlines coastlines Indian coastline accounts for around 7,000 kilometers and finally discuss the concerns of steel industry in India we said that one major concern is the cost of transportation and we are heavily dependent on railways for our steel transportation so shifting this mode of transportation from railways to coastal ways of transportation or shipping will reduce the cost of transportation a d India is blessed with coastlines so it is easy for us to shift into transportation through waterways so the mode of transportation must so this is also a very good solution for the present issue the increased transportation cost of the steel industry this can eliminate the logistical disadvantage and this will also bring in a competitive advantage for the industry another viable solution would be to transport the iron ores through pipelines so iron ores can be transported through pipelines this also has multiple affect one the cost will come down the second one the carbon footprint will also come down another thing is technological advancement technological advancement we must adopt better technology from developed countries so for this also foreign investment and foreign technology is required and that is why we promote FDI more than FIA so in FDI it is not only the capital that comes into the economy but also infrastructure also technology of the country etc so FDA or investment in FDI will increase the technological advancement of the steel industry in India along with providing capital for the industry so the more focus must be given to FDA rather than the FII as we said in the beginning the global demand for steel is increasing and the supply is decreasing India is actually trying to build the supply demand gap if we properly utilize the resources that we have mainly the manpower we know that India is blessed with demographic dividend and if India properly utilizes this demographic dividend and whatever resources we have now there is no doubt that India can become the second largest producer of steel by the year 2030 as targeted by our government increasing production of steel will not only contribute to the employment sector or the growth of employment rate in the country but it will also increase the GDP of our country by providing more output and it will also boost the make in India initiative of the government [Music] [Applause] [Music]