The Semi-integrated steel industry of India

Abstract

This dissertation attempts to examine the economics of the semi-integrated steel industry of India. The semi-integrated steel industry provided a central focus for the frenzied drive for meeting the persistent steel shortages during the past few years and has also become the nemesis of this drive. What went wrong with the industry, which was perceived to have so much potential, is the question this research addresses itself to. The economics of the industry, as it exists now, has been examined and a perspective planning exercise has been carried out to indicate the role this industry can play in the overall steel policy. The dissertation outlines and examines the techno-economic conditions that are a prerequisite for a viable operation of this industry and to what extent these conditions were not present in this Industry. The reasons for the rapid proliferation of this technology have been outlined md it has been that it has certain inherent advantages over all other processes provided certain conditions relating to availabilities of critical inputs and prices are fulfilled. It has been demonstrated that so long as these conditions relating to input and output markets were valid the industry expanded and was profitable. One of the reasons of the failure of this industry has been the adoption of a technology which was inflexible in terms of its capacity to meet varying demands. The impact of choices relating to the size of plants through economies of scale has been examined and it has been shown that the size in this industry is much too small to effectively reap economies of scale. The role of public policy in these wrong choices relating to the technology has been explained. The dissertation carries out a perspective planning exercise for the semi-integrated steel industry. The pattern of demand for steel has been examined and forecasts have been obtained with the help of a dynamic demand model. A model has been developed to estimate the availability of ferrous scrap and estimates have been obtained. On the basis of the likely availabilities of ferrous scrap and power various technology and public policy alternatives have been evaluated for the revival and growth of this industry.