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Last Updated: Friday, 22 April, 2005, 05:50 GMT 06:50 UK
India fires up steel production
By Zubair Ahmed
BBC correspondent in Mumbai

Steel coils
India's consumer boom has fuelled the demand for cold metal
India's iron and steel industry seems poised to double its production in five years in response to an anticipated sharp rise in domestic demand.

India's government recently pledged to spend $15bn on infrastructure projects, such as roads, bridges, hotels and airports, to bring the country up to international standards.

This is expected to send annual consumption rocketing from current levels of about 36 million tonnes per year.

Producers also hope the steel industry will become another sunshine industry, fuelled by a rapid rise in the demand for washing machines, fridges, TV sets and other consumer items using steel as a major ingredient.

Such as cars.

Time was when the average Indian had to wait for at least five years to buy a car from just a couple of auto makers operating in the country.

Growth in demand for automobiles will increase demand for steel
Ravi Kant, Tata Motors

Now, if you have the money you can have the vehicle right away.

"We have already consumed nearly one million tonnes of steel in Tata Motors and I can only say that growth in demand for automobiles will increase demand for steel quite substantially," says Ravi Kant, chief executive of Tata Motors of the Tata Group.

This greatly contributes to the rise in the price of steel, and several new state-of-the-art steel factories are currently under construction to respond to the demand.

Wheels of fortune

But despite the apparent boom, India's steel consumption is still one of the lowest in the world.

Esser Steel boss Prashant Ruia
Mr Ruia says exports are crucial

At 300 million tonnes a year, neighbouring China is far ahead.

This yawning gap is not lost on steel industry officials.

"If you look back to the 60s and early 70s, China and India were producing the same amount of steel," explains steel expert Narender Nayar.

"In the last 20 years China has gone up by leaps and bounds."

That is largely because China has created extra capacity. It has built infrastructure at a rapid pace.

Mr Nayar insists India is catching up.

"Our infrastructure is coming up only now. "

Leading producer

Beyond a rise in demand at home, Indian steel producers are also eyeing the international markets, including the lucrative Chinese market.

Many believe India has the potential to become one of the leading steel producers in the world
Prashant Ruia, Essar Steel

Private players, such as Essar Steel, are gearing up to increase their production with a view to become global players.

"Essar Steel is India's largest exporter for flat products and has been so for the last five year," says Essar boss Prashant Ruia.

"We continue to maintain 30% to 40% export of all our products.

"Basically we are going from 3 million tonnes to 3.5 million tonnes over the next two years."

A shortage of coal to factories delays steel production, though, Mr Ruia says.

"Because of the vast reserves of iron ore and coal, many believe India has the potential to become one of the leading steel producers in the world", he says.

Others, such as Mr Nayar, feels there is still too much government control over the industry. He insists it needs to be done away with quickly.

Until the government completely loosens its hold on the industry's pricing structure and allows full freedom to private players, the industry's steely resolve may not remain intact, he says.

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