Porter's Analysis of Indian Steel Industry
INTRODUCTION
Post independence, steel industry in India came under the regulatory framework of Government of India, which stipulated that steel industry be reserved under the public sector. It also stipulated that capacity creation and enhancement would require licensing, and that pricing and distribution of steel would be subject to govt. control. Nationalization of TISCO, that existed from before independence could not be carried out due to popular pressure[3].
Economic reforms were started in 1991 with the new industrial policy- licensing requirement for capacity enhancement was withdrawn, and the industry was opened to private and foreign players. Pricing and distribution controls were removed in 1992. import/export restrictions were removed and import duty rates have been slashed. Policies like reduction in import duties for capital goods, convertibility of the rupee on trade account, permission to mobilize resources from overseas financial markets, and tax structure rationalization have helped the industry performance.
In the early 1990s, global prices were high and domestic demand forecast was optimistic, which resulted in addition of new capacities especially by private sector. The later period of 1990s saw a drop in demand for steel on account of recession affecting the automobile sector, tardy progress of infrastructure projects, and an overall drop in investments. The industry also had to face stiff competition on account of a phased reduction in import duties from 100% to 10%.
Today, the Indian steel industry is the eighth largest in the world with 31.8 million tones annual production (3.3 % of world production). The per capita consumption of iron in India is low at ~ 20 kg[3].
The contribution of the steel sector to the GDP is about 1.3%. About 10% of the collection through Central Excise comes from the steel industry. It provides direct employment to about 0.4 million people, of which 40% are in the integrated steel-producing units. Of
Post independence, steel industry in India came under the regulatory framework of Government of India, which stipulated that steel industry be reserved under the public sector. It also stipulated that capacity creation and enhancement would require licensing, and that pricing and distribution of steel would be subject to govt. control. Nationalization of TISCO, that existed from before independence could not be carried out due to popular pressure[3].
Economic reforms were started in 1991 with the new industrial policy- licensing requirement for capacity enhancement was withdrawn, and the industry was opened to private and foreign players. Pricing and distribution controls were removed in 1992. import/export restrictions were removed and import duty rates have been slashed. Policies like reduction in import duties for capital goods, convertibility of the rupee on trade account, permission to mobilize resources from overseas financial markets, and tax structure rationalization have helped the industry performance.
In the early 1990s, global prices were high and domestic demand forecast was optimistic, which resulted in addition of new capacities especially by private sector. The later period of 1990s saw a drop in demand for steel on account of recession affecting the automobile sector, tardy progress of infrastructure projects, and an overall drop in investments. The industry also had to face stiff competition on account of a phased reduction in import duties from 100% to 10%.
Today, the Indian steel industry is the eighth largest in the world with 31.8 million tones annual production (3.3 % of world production). The per capita consumption of iron in India is low at ~ 20 kg[3].
The contribution of the steel sector to the GDP is about 1.3%. About 10% of the collection through Central Excise comes from the steel industry. It provides direct employment to about 0.4 million people, of which 40% are in the integrated steel-producing units. Of