Wednesday, August 22, 2007

Politics Invade Steel Projects

There is all round euphoria and optimism pervading the steel ministry. The national steel policy had envisaged a total production of 110 million tonnes by 2020. The ministry had originally envisaged steel production of 65 million tonnes by 2012, which had been revised to 80 million tonnes. Having revised production figures for crude steel production in the financial year 2006-07 and pegging at 50.71 million tonnes and that of finished steel at 51.90 million tonnes thus becoming the 5th largest steel manufacturer in the world, the optimism of Steel ministry understandably continues to soar high. The steel secretary said recently “Based on the current expansion program, that the companies have presented, it is estimated that the capacity of all the companies put together to touch close to 120 million tonnes. Even if they operate at 90% of the installed capacity, the production level will be at 110 million tonnes.”
In industry circles, such projections of capacity expansion are termed differently namely Pessimistic, Optimistic and Realistic. While the Optimistic projection has been given above, the pessimistic projection would be quite uninspiring based on growth attained in the past decades. The growth of steel industry during 2006-07 though very outstanding cannot be taken for granted as normal for the next five years, some cynics may argue.
It is understandable that such optimism is based on what was discussed by the ministry officials with the steel industry captains recently. It is reported that they pledged to create an additional capacity of 70 million tonnes within next five years and "they have gone full throttle to fructify their expansion plans".
Unfortunately, things are not moving always exactly as per the plans drawn up by industry captains and bureaucrats. There is too much politics in the air polluting the industrialisation tempo. The violent resistance in several states to SEZs serves to tell the people who are actually calling the shots. Even the POSCO steel project in Orissa which was showcased as the largest foreign investment in the steel sector has been languishing for nearly two years due to local agitation over land acquisition problems. The inter-ministerial group (IMG), set up by the government to expedite investments in the sector, cannot provide relief to investors whenever politics get precedence over economics.
So whether projections will ultimately turn out to be optimistic, pessimistic or realistic will depend upon politics and going by the present uncertainties and the low level to which it has already plummeted, such optimism may turn out to be misplaced.