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Policy paralysis: steel target missed by 40%

Tangled in issues related to land acquisition and undone by the policy paralysis that has scuttled reforms, the Indian steel industry has missed its production target for 2011-12 by 40% as mega steel projects announced during the last decade have remained on paper. Sumant Banerji reports. Heavy metal, but not rocking

business Updated: Apr 22, 2012 22:39 IST
Sumant Banerji

Tangled in issues related to land acquisition and undone by the policy paralysis that has scuttled reforms, the Indian steel industry has missed its production target for 2011-12 by 40% as mega steel projects announced during the last decade have remained on paper.

Steel production in the country inched to 72 million tonnes last fiscal, against the target of 124 mt, as big ticket projects like Posco's 12 mt steel plant in Odisha and ArcelorMittal's twin facilities in Jharkhand and Odisha remained in limbo. The government has now revised the timeline for achieving the target to 2016-17.

"That target was wishful and set 4 years ago when the situation was different," said a senior steel ministry official. "Land acquisition is a thorny issue and there is no way to bypass it. Unfortunately, everything is getting stuck there. This is the perfect example of policy paralysis."

Posco's Rs. 52,000 crore project - the country biggest foreign direct investment (FDI) project, is facing a nearly 6-year delay as the company has not been able to acquire land. Initially it was expected to go on-stream by July 2010; now it has been put back to 2016-17.

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ArcelorMittal's projects are also progressing at a snail's pace. Two important policy decisions - the land acquisition bill and new mining bill - are still pending, affecting it.

"It is very difficult to say anything... when we will start construction, when we will make any progress," Lakshmi Mittal, chairman and CEO, ArcelorMittal, had said in February. "We are not even counting them (Indian projects) in our business plans for the next few years. There is really a lot of work needed to put projects on fast-track approvals."

Over 222 MoUs were signed in the last 6 years with an estimated investment of R870,640 crore and additional capacity of 276 mt by 2020. None of the greenfield projects has taken off so far.

"Our companies have mastered the art of signing MoUs as most of them are on paper only... most of them have neither acquired land nor got mining leases," said Beni Prasad Verma, steel minister. "We would be ahead of the US if all of them were implemented."