From Our Special Correspondent
Daijiworld Media Network - Bangalore

Bangalore, Sep 17: Apex industry body ASSOCHAM has urged the government to increase iron ore supply for domestic steel industry, which is currently running at an all time low utilization level in the country as such a move would bring down steel imports worth a whopping six billion dollars, promote steel exports and curb the ever-rising current account deficit.

"Iron ore exports of a 100 million tonne (mt) would earn India $ 10 billion while the country would earn $ 8-9 billion through exports of just 10 mt steel, besides value addition to the raw material would lead to employment generation, capacity building and various other benefits,” highlighted a study titled `Iron Ore Exports: Threat for Indian Steel Industry,’ conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Rupee depreciation has made domestic steel sector 22 per cent more competitive thereby giving a huge impetus to the finished steel exports as such relaxing the exports restrictions on iron ore would further worsen India’s  CAD, said an ASSOCHAM spokesperson while releasing the study.

Pointing out that both the demand and production of steel was growing steadily, ASSOCHAM projected that India’s steel production might reach 81 mt in the current year as against 78 mt in 2012-13.

With iron ore production in the country declining significantly, India is likely to witness a shortfall of about 30 mt as iron ore production is likely to stay at about 100-110 mt in the current year and it requires about 140 mt of iron ore to produce 81 mt of steel, the ASSOCHAM study said.

“Thus any relaxation of iron ore export duty will further worsen the situation thereby making it difficult for domestic steel producers to survive,” said the spokesperson.

Owing to the unavailability of iron ore, capacity utilization of crude steel in India has come down to about 82 per cent from about 88 per cent a year ago, further highlighted the ASSOCHAM study.

Rampant shortage of iron ore has also lead to huge imports of iron and steel making raw material as India imported various metallics worth over $9 billion for iron ore and steel industries thereby increasing the CAD significantly.

“There has a sudden jump of 66 per cent in import of scrap from about five mt in 2011-12 to over eight mt in 2012-13,” said the ASSOCHAM study.

“Likewise, there has been huge jump of 1,475 per cent in import of direct reduced iron (DRI) and hot-briquetted iron (HBI) from less than half lakh tonne a year ago to over 7.5 lakh tonne in the current year,” the study said.

As per the data compiled by ASSOCHAM, India has ample of agglomeration capacity as pellet plant capacity is likely to reach 85 mt by 2014-15 from about 64 mt in 2012-13. Similarly, sinter capacity is also likely to grow to 86 mt by 2014-15 from current level of 75 mt.

Due to decline in total iron ore production, there has also been a significant decline in production of lumps and fines. Iron exporters are spreading a myth that due to unavailability of utilization of fines capacity in India, fines are being exported.

Considering that iron ore production in the country is likely to drop, the production of fines is expected to stay at 60 mt in the current year as against 88 mt in 2012-13 and thus pellet and sinter plant will continue to operate below rated capacity, the ASSOCHAM study said.

In view of the massive steel requirement for infrastructure development, there is a need to significantly ramp up steel production capacity in India which calls for urgent action on the aforesaid issues, the study said.