1.1 Field Of Research
The field of research is to study the factors which affect the profitability of IRON AND STEEL industry, which is the most crucial element for the growth of any developed or developing economy. It acts as backbone of human civilisation. It is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flows and income generation. With regards to Indian Economy it is one of the most energy intensive sectors. Increase in productivity can be achieved through cleaner technologies and manufacturing process which will help in merging Economic, Social and Environmental Objectives. Many companies in the past many years have undergone mergers and acquisitions with bigger industrial giants either to clear off their debts or due to inability to perform in the existing market scenario. The research reveals the major reasons behind the failure of big iron and steel giants in the past and helps us to have a better understanding about the reasons behind their downfall.
1.2 PURPOSE & Scope
The purpose of the research is how to increase the profits of the Iron and Steel Industry so that it can compete with the global market and existing market scenario. The Indian scenario has changed a lot in past decade or so. The main purpose of the research is also to identify the problems and ways to overcome those problems. By analyzing historical data of India’s productivity, import-export and growth rate in this sector will help us identify the past performance, will show the existing scenario and will give us potential future development strategies and scope of further development.
2. Literature Review
The establishment of Tata Iron and Steel Company (TISCO) in 1907 was the starting point of Modern Indian steel industry. Afterwards a few more steel companies were established namely Mysore Iron and Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd) in 1923; Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) in 1923; and Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron and Steel Co) in 1939. All these companies were in the private sector. At the time of independence, India had a small Iron and Steel industry with production of about a million tonnes (Mt). In due course, the government was mainly focusing on developing basic steel industry, where crude steel constituted a major part of the total steel production. Many public sector units were established and thus public sector had a dominant share in the steel production till early 1990s. Mostly private players were in downstream production, which was mainly producing finished steel using crude steel products. Capacity ceiling measures were introduced. Basically, the steel industry was developing under a controlled regime, which established more public sector steel companies in various segments. Till early 1990s, when economic liberalization reforms were introduced, the steel industry continued to be under controlled regime, which largely constituted regulations such as large plant capacities were reserved only for public sector under capacity control measures price regulation for additional capacity creation producers had to take license from the government foreign investment was restricted and there were restrictions on imports as well as exports. Undoubtedly there has been significant government bias towards public sector undertakings. But not all government action has been beneficial for the public sector companies. Freight equalization policies of the past were one example. The current governmental ‘moral-suasion’ to limit steel price increases is another. However, after liberalization when a large number of controls were abolished, some immediately and others gradually the steel industry has been experiencing new era of development. Major developments that occurred at the...