The steel industry is set to invest almost Rs 25,000 crore (Rs 250 billion) in the next two to three years, not counting the proposed mega-investments of over Rs 100,000 crore (Rs 1,000 billion) proposed by global metals companies in Orissa, which may take anywhere between five and seven years to finally materialise.
While the former plans have already been chalked out, the Orissa-centered global investments are still between "mulling the possibility" and "studying the feasibility" stage.
But what is certain from investment plans announced till now is that the domestic steel industry is set to create by 2006-07 around 10-12 million tonne of new capacity, amounting to almost a one-third increase from the current capacity of 34 million tonne.
With capacity addition in a state of flux, industry sources are not clear whether the current pecking order will change significantly.
Currently, the Steel Authority of India Ltd is the largest domestic steel producer, with a capacity of over 11 million tonne, followed by Tata Steel at 6 million tonne, and Rashtriya Ispat at 3.5 million tonne.
By the beginning of the next decade, India could have a steel making capacity of around 90 million tonne. While approximately 44 million tonne of capacity and commensurate investments will come up in Orissa, the eastern belt of Jharkhand, Chhattisgarh and parts of West Bengal will also see considerable investments.
Leading the pack of investors is BHP-Billiton, the world's largest mining company, which has announced a 10 million tonne steel project in association with Korean steel major Posco.
The team, which has approached the Orissa government for mining leases, plans an investment of around Rs 39,000 crore (Rs 390 billion) in the project.
While BHP-Billiton will be handling the upstream facilities of developing the mines and procuring the ore, Posco will run the steel plant.
SAIL has scripted a Rs 25,000 crore (Rs 250 billion) plan, which will take its capacity to 20 million tonne by 2012. The company has already embarked on the project, which will be funded largely through internal accruals.
The project will include capacity expansion in all its four plants in Durgapur, Rourkela, Bhilai and Bokaro. The company is also planning to acquire overseas coal mines to ensure captive resources.
Tata Steel, the private sector steel giant, is looking at a capacity addition of around 3.4 million tonne at its Jamshedpur facility, involving an investment of Rs 9,800 crore (Rs 98 billion), along with a 6 million tonne steel plant in Orissa at an estimated outlay of Rs 15,000 crore (Rs 150 billion) over the next five-seven years.
Development of iron ore mines, setting up steel making facilities and the construction of a port at Dhamra are included in the project.
Essar Steel is also weighing the option of setting up a 4 million tonne steel complex, along with a 6 million tonne pellet plant, in Orissa. The company has announced a Rs 700 crore (Rs 7 billion) investment to expand capacity in its unit in Hazira from 2.2 million tonne at present to 3.4 million tonne.
Jindal Iron & Steel Company is targeting a capacity of 10 million tonne by 2010. The company is currently undergoing a capacity expansion from its existing 2.5 million tonne to 4 million tonne with an investment outlay of Rs 1,275 crore (Rs 12.75 billion).
Another Jindal group company, Jindal Stainless Steel, is also looking at Orissa for setting up a 1.6 million tonne integrated stainless steel plant at an investment of Rs 7,000 crore (Rs 70 billion).
Ispat Industries is also in the process of implementing the second phase of its expansion project, which will take its installed capacity to over 3 million tonne. The company has also planned a 110 MW captive power plant to support its expansion plans.
Rashtriya Ispat has planned to increase capacity by around 6-7 million tonne by 2010, involving an investment of Rs 17,000 crore (Rs 170 billion). Besides these majors, downstream cold-rolling steel companies like Bhushan Steel and Uttam Galva have also announced capacity increases.
The race to be a part of the booming steel industry has led non-ferrous metals major Vedanta Resources to diversify into iron-ore mining and steel making.
The Anil Agarwal-controlled group has had preliminary discussions with the Orissa government to develop an iron-ore mine in the state, combined with steel production at Palaspanga in Keonjhar district.
While Vedanta will manage upstream projects, focusing exclusively on iron-ore, steel production will be under the control of Volcan Investments Ltd --- the holding company of Vedanta.
The project is to be fully integrated and the final output will range from hot rolled and cold rolled coils to long products. The company has entrusted MN Dastur & Co to prepare a feasibility study.
Industry sources are optimistic about the demand scenario and believe the domestic market will grow at a healthy rate. "With estimated growth of around 8-10 per cent in the next few years and a booming export market, this capacity increase will be absorbed," a senior executive of a steel company said.
