Unit-11
Large scale Industries- Steel, Cement, Sugar and Cotton
Introduction
At global level in 2018, the planet crude production reached 1789 million tonnes (mt)and showed a growth of 4.94% over 2017.China remained world’s largest crude steel producer in 2018 (928 mt) followed by India (106 mt), Japan (104 mt) and therefore the USA (87 mt).
Per capita finished steel consumption in 2017 is placed at 212 kg for world and 523 kg for China and for India it had been 69 kg as published by World Steel Association. India is that the largest producer of sponge iron within the world and therefore the 3rd largest finished steel consumer within the world after China & USA.
The Government has taken various steps to spice up the world including the introduction of National Steel Policy 2017 and allowing 100 per cent Foreign Direct Investment (FDI) within the steel sector under the automated route.
The growth within the Indian steel sector has been driven by domestic availability of raw materials like ore and cost-effective labour. Consequently, the steel sector has been a serious contributor to India’s manufacturing output.
Development of Steel Sector
The economic reforms initiated by the govt since 1991 added new dimensions to industrial growth generally and therefore the industry especially .
Licensing requirement for capacity creation was abolished, apart from certain locational restrictions and therefore the industry was faraway from the list of industries reserved for the general public sector.
Automatic approval of foreign equity investment up to 100% was granted. Price and istribution controls were removed with a view to form the industry efficient andcompetitive.
Restrictions on external trade, both in import and export, were removed with drastic reductions in duty .General policy measures like reduction in duty on capital goods, convertibility of rupee on trade account, permission to mobilise resources from overseas financial markets among others, also benefited the Indian industry .
The Growth Profile
The liberalization of commercial policy and other initiatives taken by the govt have given a particular impetus for entry, participation and growth of the private sector within the industry .
While the prevailing units are being modernized/expanded, an outsized number of latest steel plants have also come up in several parts of the country supported modern, cost effective, state of-the-art technologies.
In the previous couple of years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to line up fresh green field projects in several states of the country.
Today, because the 2nd largest crude steel producer globally and with a capacity of over 100 million tonne, the Indian industry has come an extended way.
Pig Iron: India is additionally a crucial producer of iron . Post-liberalization, with fixing several units within the private sector, not only imports have drastically reduced but also India has clothed to be a net exporter of iron . The private sector accounted for 94% of total production of iron within the country. Pig iron, crude iron obtained directly from the furnace and cast in molds.
Sponge Iron: India, world’s largest producer of sponge iron (2018), features a host of coal based units located within the mineral-rich states of the country. Over the years, the coal based route has emerged as a key contributor and accounted for 79% of total sponge iron production within the country.
Sponge iron may be a metallic product produced through direct reduction of ore within the solid state. The method of sponge iron making aims to get rid of the oxygen from ore the standard of sponge iron is primarily ascertained by the share of metallization (removal of oxygen), which is that the ratio of metallic iron to the entire iron present within the product.
Import and Export of Iron & Steel
Although India started exporting steel way back in 1964, exports weren't regulated and depended largely on domestic surpluses. However, within the years following economic liberalisation, export of steel recorded a quantum jump.
Subsequently, the rapid climb of domestic steel demand has led to a decline within the rate of growth of steel exports from India to make sure that domestic requirements are adequately met. India is currently a net importer of total finished steel. Iron & steel are freely importable and freely exportable.
Additional Capacity Creation privately Sector
Since 1991 with further opening from the Indian economy, a focused reform process in situ and a rapid but stable growth of the Indian economy, investments have flown significantly into the industry of the country with major investment plans announced within the states of Odisha, Jharkhand, Karnataka, Chhattisgarh and West Bengal .
Crude steel capacity within the country stood at 138 million tonnes in 2017-18 as per data released by the JPC while the National Steel Policy 2017 envisions domestic crude steel capacity reaching 300 million tones once a year by 2030-31.
Demand – Availability
Demand and availability of iron and steel within the country are largely determined by economic process and gaps in demand-availability are met mostly through imports.
Interface with consumers exists by way of meeting of the Steel Consumers’ Council, which is conducted on regular basis. Interface helps in redressing availability problems, complaints associated with quality.
Steel Prices
Price regulation of iron & steel was abolished on January 16, 1992. Since then steel prices are determined by the interplay of economic process .
Domestic steel prices are influenced by trends in staple prices, demand – supply, conditions within the market, and international price trends among others.
As a facilitator, the govt monitors the steel market conditions and adopts fiscal and other policy measures supported its assessment. Currently, GST of 18% is applicable on
Steel and there's no duty on steel items.
A Steel Price Monitoring Committee has been constituted by the govt with the aim to watch price rationalization, analyze price fluctuations and advise all concerned regarding any irrational price behavior of steel commodity.
To avoid any distortion in prices in sight of ad-hoc and rising imports, the govt had taken several steps including raising duty and imposed a gamut of measures including anti- dumping and safeguard duties on a number of applicable iron and steel items.
In a further move, to curb steel imports, the Indian government banned the assembly and sale of steel products that doesn't meet BIS approval.
To check the sale of defective and sub-standard chrome steel products used for creating utensils and various kitchen appliances, the chrome steel (Quality Control)
Order, 2016, released for products utilized in making utensils and kitchen appliances which will help filter imports of the metal.
Government Initiatives
An duty of 30 per cent has been levied on ore to make sure supply to domestic industry
Government’s specialise in infrastructure and restarting road projects is aiding the boost in demand for steel. Also, further likely acceleration in rural economy and infrastructure is predicted to steer to growth in demand for steel.
The Union Cabinet has approved the National Steel Policy (NSP) 2017, because it seeks to make a globally competitive industry in India.
India is that the second largest producer of cement within the world. No wonder, India's cement industry may be a vital a part of its economy, providing employment to quite 1,000,000 people, directly or indirectly. Ever since it had been deregulated in 1982, the
Indian cement industry has attracted huge investments, both from Indian also as foreign investors.
India features a lot of potential for development within the infrastructure and construction sector and therefore the cement sector is predicted to largely enjoy it. A number of the recent major initiatives like development of 98 smart cities are expected to supply a serious boost to the world .
Expecting such developments within the country and aided by suitable government foreign policies, several foreign players like Lafarge-Holcim, Heidelberg Cement, and Vicat have invested within the country within the recent past. a big factor which aids the expansion of this sector is that the ready availability of the raw materials for creating cement, like limestone and coal.
Market Size
Cement production capacity stood at 502 million tones per annum (mtpy) in 2018.
Capacity addition of 20 million tones once a year (MTPA) is predicted in FY19- FY 21. The Indian cement industry is dominated by a couple of companies. The highest 20
Cement companies account for nearly 70 per cent of the entire cement production of the country. a complete of 210 large cement plants account for a cumulative installed capacity of over 410 million tones, with 350 small plants accounting for the remainder . Of those 210 large cement plants, 77 are located within the states of Andhra Pradesh ,Rajasthan and Tamil Nadu .
Investments
According to data released by the Department of commercial Policy and Promotion (DIPP), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.28 billion between April 2000 and March 2018.
Some of the main investments in Indian cement industry are as follows:
• As of December 2018, Raysut Cement Company is getting to invest US$ 700 million in India by 2022.
• During 2017-18, Ultratech commissioned a green field clinker plant with a capacity of two .5 MTPA and a cement grinding facility with 1.75 MTPA capacity in Dhar, Madhya Pradesh. The corporate is expecting to finish a 1.75 MTPA cement grinding facility and a13 MW waste heat recovery system by September 2018 at an equivalent location.
• JK Cement is getting to invest Rs 1,500 crore (US$ 231.7 million) over subsequent 3 to 4 years to extend its production capacity at its Mangrol plant from 10.5 MTPA to 14
MTPA.
Government Initiatives In order to assist the private sector companies thrive within the industry, the govt has been approving their investment schemes. Some such initiatives by the govt within the recent past are as follows:
In Budget 2018-19, Government of India announced fixing of a reasonable Housing Fund of Rs 25,000 crore (US$ 3.86 billion) under the National Housing Bank (NHB)which can be utilised for alleviating credit to homebuyers. The move is predicted to spice up the demand of cement from the housing segment.
Road Ahead
The eastern states of India are likely to be the newer and virgin markets for cementcompanies and will contribute to their bottom line in future. Within the next 10 years,
India could become the most exporter of clinker and grey cement to the center East,Africa, and other developing nations of the planet . Cement plants near the ports, as an example the plants in Gujarat and Visakhapatnam, will have another advantage for exports and can logistically be armed to face stiff competition from cement plants within the interior of the country.Cement-June-2019 Due to the increasing demand in various sectors like housing, commercial construction and industrial construction, cement industry is predicted to succeed in 550-600 Million
Tonnes once a year (MTPA) by the year 2025.
A large number of foreign players also are expected to enter the cement sector, due to the profit margins and steady demand.
A major player within the worldwide sugar trade, India produced 33 million metric tons in 2017/2018. The state is seeing record levels of sugar production and is about to overtake Brazil because the highest sugar producer.
India’s sugar production rose 11.5% during the 2014 to 2015 season on bumper cane production. This increase in production led to an in depth surplus in Indian sugar with mills struggling to pay fair wages to workers.
Sugar Industry’s Location in India Sugar industry is broadly distributed over two major areas of production- Uttar Pradesh , Bihar, Haryana and Punjab within the north and Maharashtra, Karnataka, Tamil Naduand Andhra Pradesh within the south. South India has tropical climate which is suitable for higher sucrose content givinghigher yield per unit area as compared to north India.
Significance
Multiple linkages: Sugar may be a labour-intensive industry, up the whole value-chain from cane-growing to sugar and alcohol production. Across multiple districts of Uttar Pradesh , Maharashtra, Tamil Nadu, Karnataka, and a number of other other states, it's the most source of employment.
Source of employment: A sugar industry is source of livelihood for 50 million farmers and their families. It provides direct employment to over 5 lakh skilled laborers but also to semi-skilled laborers in sugar mills and allied industries across the state .
Byproducts: the varied byproducts of sugar industry also contribute to the economic process and promote variety of allied industries. Sugarcane has emerged as a multi- product crop used as a basic staple for the assembly of sugar, ethanol, paper, electricity and besides a cogeneration of ancillary product.For livestock feeding: Molasses from sugar cane is employed for alcohol production and livestock feeding since it's highly nutritious.
Biofuel: In India, the overwhelming majority of ethanol is produced from sugarcane molasses, a by-product of sugar. Ethanol blended fuel can help in reducing petroleum imports.
Bagasse: Basic utilisation of baggase continues to be as a fuel. But it's also suitable staple for paper industry. 30% of cellulose requirement comes from agricultural residues. However, since the mills are scattered everywhere the country, collection of surplus baggase poses a drag and makes paper units uneconomical.
Problems of Sugar Industry
Uncertain Production Output Sugarcane has got to compete with several other food and cash crops like cotton, oil seeds, rice, etc. This affects the availability of sugarcane to the mills and therefore the production of sugar also varies from year to year causing fluctuations in prices resulting in losses in times of excess production thanks to low prices.
Low Yield of Sugarcane
India yield per hectare is extremely low as compared to a number of the main
Sugarcane producing countries of the planet . For instance , India’s yield is merely 64.5 tonnes/hectare as compared to 90 tonnes in Java and 121 tonnes in Hawaii.
Short crushing season Sugar production may be a seasonal industry with a brief crushing season varying normally from 4 to 7 months during a year.
It causes loss and seasonal employment for workers and lack of full utilization of sugarmills.
Low Sugar recovery rate
The average rate of recovery of sugar from sugarcane in India is a smaller amount than ten per cent which is sort of low as compared to other major sugar producing countries.
High cost
High cost of sugarcane, inefficient technology, uneconomic process of production and heavy excise duty end in high cost of producing .
Most of the sugar mills in India are of small size with a capacity of 1,000 to 1,500 tonnes per day thus fail to require advantage of economies of scale.
Government policy and control
Government has been controlling sugar prices through various policy interventions likeduty , imposition of stock limit on sugar mills, change in meteorology rule etc., to balance supply demand mismatch.
But these controls have resulted in unremunerative sugar prices, increasing arrears for sugar mills and dues to be paid to sugarcane farmers.
Government Initiative Rangarajan committee (2012) was found out to offer recommendations on regulation of sugar industry. Its major recommendations:
Abolition of the quantitative controls on export and import of sugar, these should get replaced by appropriate tariffs. Committee recommended no more outright bans on sugar exports.
The central government has prescribed a minimum radial distance of 15 km between any two sugar mills, this criterion often causes virtual monopoly over an outsized area can give the mills power over farmers. The Committee recommended that the space norm be reviewed.
There should be no restrictions on sale of by-products and costs should be market determined. States should also undertake policy reform to permit mills to harness power generated from bagasse.
Remove the regulations on release of non-levy sugar. Removal of those controls will improve the financial health of the sugar mills. This, in turn, will cause timely payments to farmers and a discount in cane arrears.
Based on the report, Commission for Agricultural Costs and costs (CACP)
Recommended a hybrid approach of fixing sugarcane prices, which involved fair and remunerative price (FRP).
The year 2013-14 was a water-shed for the sugar industry. The Central Government considered the recommendations of the committee headed by Dr. C. Rangarajan on de-regulation of sugar sector and decided to discontinue the system of levy obligations on mills for sugar produced after September, 2012 and abolished the regulated release mechanism on open market sale of sugar.
The de-regulation of the sugar sector was undertaken to enhance the financial health of sugar mills, enhance cash flows, reduce inventory costs and also end in timely payments of cane price to sugarcane farmers.
The recommendations of the Committee concerning Minimum Distance Criteria and adoption of the Cane Price Formula are left to State Governments for adoption andimplementation, as considered appropriate by them.
With the aim of benefitting Sugar farmers and so as to clear their arrears/cane dues, the Union Government has decided to extend the Minimum asking price (MSP) of Sugar from Rs. 29 to Rs. 31 for the year 2019-20.
Fair and Renumerative Price FRP is that the minimum price that the sugar mills need to pay to farmers.
It is determined on basis of recommendations of Commission for Agricultural Costs and costs (CACP) and after consultation with State Governments and other stake-holders.
State Advised Price (SAP)
In other key growing states of Uttar Pradesh , Punjab, Haryana, Tamil Nadu and
Uttarakhand, farmers get the State Advised Price (SAP) fixed by state governments which is typically above FRP.
Apart from this, the govt has also provided incentives on producing ethanol from B- heavy molasses and cane juice to divert the sugar surpluses towards biofuel, thus indirectly supporting sugar prices. The new Biofuel Policy 2018 has fixed a target of achieving 20 per cent ethanol blending with petrol by 2030.
Way Forward
The sector needs infusion of capital, but also policy measures and structural changes. Technological upgradation in age old mills especially in Uttar Pradesh and Bihar to enhance efficiency in production.
Major sugar producing States like Maharashtra and Karnataka have migrated to the progressive revenue-sharing formula other states should also introduce revenue- sharing formula to make sure farmers receive a share within the profits.
When domestic production is probably going to be in more than domestic consumption government should encourage exports through policy changes.
Mills should be allowed to supply more alcohol (a higher value product with massive industrial demand). Exports of sugar and alcohol should even be decontrolled. It'll improve financial situation of mills and will afford to pay farmers a price supported the market prices of sugar.
The production cost of sugar in India is one among the very best within the world.
Intense research is required to extend the sugarcane production within the agricultural field and to introduce new technology of production efficiency within the sugar mills.
Production cost also can be reduced through proper utilisation of by- products of the industry.
Government should encourage ethanol production. It'll bring down the country’s oil import bill and help in diversion of sucrose to ethanol and to balance out the surplus production of sugar.
Textile industry includes cotton, jute, wool, silk, and artificial fiber textiles. India is one among the leading producers of textile goods. It's one among most vital |the biggest the most important and most important sector within the economy in terms of output, exchange earning, and employment in India. Its contribution forms 20 per cent of the economic production, 10 per cent of the excise collection, 18 per cent of employment within the industrial sector, 20 per cent of the country's total export earning and 4 percent of the GDP. At the present , India is that the third largest producer of silk, fifth largest producer of synthetic fibers, and has the most important loom age and spindles within the world.
India enjoyed monopoly within the production of textile goods from 1500 BC to 1500AD. Indian cotton and silk textiles were in great demand everywhere the planet . It had been the arrival of British in India and therefore the technological revolution in Britain in 1779 which led to the downfall of the Indian manufacturing. British after the consolidation of their rule out India encouraged the export of staple from India to Britain and import of manufactured goods from Britain to India. The primary factory was established in 1854 in Mumbai by C.N. Dewar. The fast growth of cotton textile occurred in 1870 when there was much demand of Indian goods within the wake of yank war . Before the primary war the amount of Indian textile mills rose to 271. The demand forcloth during the Second war led to further progress of the textile industry.
The industry suffered a setback in 1947 nearly as good quality cotton growing area visited Pakistan. Consequently, India had to import cotton from the African countries. Cotton being a pure staple provides an opportunity to determine factory either within the areas of staple or within the market. In India, most of the textile mills are within the cotton growing areas or within the neighboring cities and towns. The situation of cottontextile industry is additionally affected by: (i) staple , (ii) proximity to plug , (iii) moistweather, (iv) capital, (v) skilled and cheap labour, (vi) transport, (vii) sea-port, (viii)export facility and therefore the domestic and international markets.
State-wise Production of cotton in India(In sq metres)
Maharashtra 400,550
Gujarat 355,745
Tamil Nadu 65,850
Punjab 56,850
Madhya Pradesh 48,500
Uttar Pradesh 32,850
Rajasthan 28,880
Pondicherry 25,250
Karnataka 8,500
Kerala 6,850
Cotton Industry And Exports
Introduction
Cotton plays a crucial role within the Indian economy because the country's textile industry is predominantly cotton based. India is one among the most important producers also as exporters of cotton yarn. The textile industry is additionally expected to succeed in US$ 223 billion by the year 2021.The states of Gujarat, Maharashtra, Telangana, Andhra Pradesh , Karnataka, Madhya
Pradesh, Haryana, Rajasthan, and Punjab are the main cotton producers in India.Key Markets and Export Destinations
• Cotton yarn and fabrics exports accounts for about 23 per cent of India’s total textiles and apparel exports.
• In 2017-18, India’s cotton production was 34.86 million bales of 170 Kgs. Each
• Between Apr-Oct 2018, total textile and clothing exports stood at Rs 1.52 trillion (US$21.95 billion).
• Between Apr-Oct 2018, exports of cotton raw including waste, cotton yarn, cotton fabrics and cotton made-ups grew by 26.01 per cent year-on-year to US$ 6,893.05 million from US$ 5,470.20 million during an equivalent period last year.
Various reputed foreign retailers and makes like Carrefour, Gap, H&M, JC Penney, Levi Strauss, Macy's, Marks & Spencer, Metro Group, Nike, Reebok, Tommy Hilfiger and WaI-Mart import Indian textile products.Cotton Textile Export Promotion Council
The Cotton Textile Export Promotion Council (TEXPROCIL) takes part in national and international events to reinforce the visibility of Indian products, advertises and promotes Indian products in various media vehicles like fashion magazines, event-related pull-outs, India reports and leading trade magazines, and organizes buyer-seller meets (BSM) and trade delegation visits.
BOOKS
1. Indian Economy – Rudra Dutt & Sundarram
