By Debarati Roy and Abhishek Shanker
Dec. 10 (Bloomberg) — India’s steel production may fall short of the government target as mills planned by companies including ArcelorMittal, Posco and Tata Steel Ltd. face delays, Steel Minister Virbhadra Singh said.
The ministry will probably have to lower this year’s forecast to reach 124 million metric tons of output by March 2012, Singh said in an interview in New Delhi. Difficulties in acquiring land and iron-ore mines have stalled almost $80 billion of steel projects that would have more than doubled the nation’s 55 million-ton production, he said.
“We may have to revise our estimates if we can’t solve many of the problems of the greenfield projects,” Singh said yesterday. “I’ll be happy if we do 120 million tons or so.”
Steelmakers, aiming to set up 160 million tons of capacity in the eastern states of Chhattisgarh, Jharkhand and Orissa that together hold more than half of India’s iron-ore reserves, have failed to win mining licenses from the state governments and acquire land from protesting farmers. Prime Minister Manmohan Singh’s government aims to resolve land disputes and delays in allocating mining licenses to help achieve as much as 9 percent annual economic growth.
India’s economy in the three months to Sept. 30 expanded at the fastest pace in 1 1/2 years as manufacturing jumped. Gross domestic product grew 7.9 percent in the quarter after gaining 6.1 percent in the previous three months, the statistics bureau said on Nov. 30.
South Korea’s Posco in June 2005 said it planned to set up a $12 billion steel plant in Orissa to tap demand in India. ArcelorMittal, the world’s largest mill, announced a plan to set up a $10 billion mill in the neighboring state of Jharkhand the same year and said in 2006 it would build a similar-sized unit in Orissa. The companies said last month they have initiated talks with Karnataka to build factories in the southern state.
Tata Steel, India’s biggest producer, announced a 6 million-ton plant in Orissa in 2004 and a similar-sized plant in Chhattisgarh the next year. In 2005, Tata also announced a 12 million-ton plant in Jharkhand state. JSW Steel Ltd has announced three 12 million-ton plants in each of the states of West Bengal, Orissa and Jharkhand.
The delays come at a time when demand for steel in India, the world’s second-fastest growing major economy, is recovering faster than in overseas markets, buoyed by sales of automobiles and government spending on roads, ports, telephone and electricity networks. Supply may lag behind demand, which may rise an average 7 percent this fiscal year and is expected to increase 10 percent by March next year, Virbhadra Singh said.
India’s steel demand gained 7 percent in the first seven months of the fiscal year up to October, Steel Secretary Atul Chaturvedi said on Nov. 14, without giving specific numbers. Consumption rose to 26.49 million tons in the six months ended Sept. 30 from a year earlier, former Steel Secretary Pramod Rastogi said in October. Output rose 2 percent to 28.49 million tons, he said.
“I sympathize with the companies building greenfield projects,” steel minister Singh said. “It’s a time-consuming process.”
To contact the reporters on this story: Debarati Roy in Mumbai at email@example.com; Abhishek Shanker in New Delhi at firstname.lastname@example.org