The Telegraph
Since 1st March, 1999
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Study warns of steel boom going bust

Calcutta, April 24: The iron and steel industry is unlikely to be the driver of economic growth in Bengal unless the availability of iron ore is guaranteed, says a British study.

The exercise conducted by UK's department for international development (DFID) has concluded that sponge iron is the only segment where Bengal has a competitive edge.

But that, too, only if the supply of raw material is guaranteed in the long term.

The survey, a part of the DFID's study of urban investment climate in Bengal, was undertaken to determine whether steel could be a growth sector. The report was submitted to the government earlier this month.

The agency has expressed 'serious concern' over the viability of the large number of iron and steel units under implementation in the state.

Shortage of raw materials, primarily iron ore, and lack of railway wagons to transport steel have been identified as the primary constraints.

According to the study, Bengal will need 3 million tonnes of iron ore annually to sustain the current level of production. With Orissa embarking on expansion plans and Jharkhand imposing barriers on export of iron ore, DFID has said Bengal will find it difficult to procure ore in the future.

The agency has suggested that Bengal should leverage its coal reserves better and get central intervention to guarantee iron ore supply for its steel industry.

'Exports account for 60 per cent of India's iron ore production. Bengal should initiate dialogue with (the) Centre to clamp down on export of high-grade iron ore and focus on promoting manufacture and export of high value-added products,' the report says.

Commerce and industries secretary Sabyasachi Sen conceded that problems exist. 'It's true that we have no iron ore. It's also true that we don't have enough rakes to transport steel. But we cannot implement the DFID's suggestions on our own. They involve central policies. We'll have to take them up with the Centre,' he said.

The study noted that despite the large number of sponge iron and mild steel plants in Bengal, there was a lack of major consuming industries in the east. The government would have to promote steel-consuming industries to improve the cost competitiveness of steel units. For this, the DFID suggests, the government should attract investment in automobile and consumer durable manufacturing.

Steel products made in Bengal become less competitive because of high transportation costs of mild steel and finished products to markets in west and south India. To ease the transport constraints, it was suggested that the state should promote joint venture with the railways.

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