SELLING steel scrap has become more profitable in Uttar Pradesh than ever before. A booming real estate sector coupled with brisk construction activity in the public sector domain such as roads have kept UP’s small steel rolling mills busy supplying steel rods made out of high quality scrap for the past one year.
As a result, large steel scrap suppliers in the country’s three major steel producing states such as Bhilai (Chhatisgarh), Rourkela (Orissa) and Bokaro (Bihar) have started focussing on UP as a major market for selling superior quality scrap during the past one year.
Industry estimates put annual consumption of steel scrap in UP anywhere between 10 to 12 lakh tonnes per annum—which is being considered at least 5 per cent higher than what was recorded during the past two years.
The factors leading to rising demand for steel scrap in UP is believed to be cheaper and better quality steel rods being manufactured by 100-odd small steel re-rollers who feel their units have sufficient capacity to meet the demand for re-rolled products in UP for the next couple of years.
“Consumption of steel in Uttar Pradesh has been rising at an enormous rate. The steel prices which are currently pegged in the range of Rs 22,000 to Rs 24,000 per tonne depending upon the product category is atleast 25 per cent higher in the branded market. “
This had made SSI units consume more superior quality scrap as raw material for manufacturing rods which are comparatively cheaper and adhere to almost similar quality norms as the branded ones available in the market,” said spokesman of the UP Small Steel Rolling Mills Association Shankar Awasthi to Hindustan Times.
The small re-rollers also regularly participate in auctions for scrap carried out by the Indian Railways for meeting their raw material requirements, he said.
A sizeable chunk of the clientele of small steel re-rollers are the local metal traders in the UP cities such as Lucknow, Agra, Kanpur, Meerut and Ghaziabad where the construction activity is at a higher level than other cities and towns of the State.
The only major hurdle in the further promotion of steel scrap re-rolling business has been the higher central excise duty of 16 per cent (although small re-rollers get CENVAT benefits on raw material purchase) coupled with the UP Trade Tax of 4 per cent charged on steel products, Awasthi said.
At a time when the SSI units had been catering to a huge demand for steel in the UP market, the State Government had been extending tax concessions to new units promising an investment of a minimum of Rs 100 crore, he added.