Federation of Indian Chambers of Commerce & Industry
Welcome Address by Mr. Rajeev Chandrasekhar, MP and President FICCI at “Indian Steel Conclave 2008”
Theme: Building Capacities and Promoting Development
16 July, 2008, FICCI, New Delhi

Shri Ram Vilas Paswan, Hon’ble Minister for Steel, Shri Govindrajan, Shri Pandey,

Ladies and Gentlemen:

Good morning and welcome to the Indian Steel Conclave 2008 – with its theme of Capacity Building and Promoting Development. This conclave is being held at a critical time for the Industry which is poised to expand significantly in terms of size and scale.

The case for having a globally competitive Steel Industry in India is an old one. The combination of a low current consumption and therefore a potentially large market for the product and the comparative lower production costs has represented and defined the opportunity of the Indian Steel Sector. Over the last decade or so, this opportunity has been characterized by some false starts and only in recent years has the sector and its capacities built at high costs aligned to a robust demand cycle – driven primarily by domestic demand and export demands from neighouring consumers. Our per capita consumption at 43.4 kg is amongst the lowest in the world. The Indian Steel Industry is on a roll and this momentum needs to be consolidated, sustained and increased.

Apart from Icons like LN Mittal who have raised the profile of the Steel Industry and in a sense made it more glamorous, the other reasons for Steel to hit the headlines recently has been the the demand – supply mismatch in Steel which has caused higher prices and that in turn higher WPI and inflation numbers. Understandably, given that it is election season, Inflation tends to generate knee jerk effects on the part of Government and there have been efforts by Government to directly intervene to moderate price increases etc.

While this negotiated quasi administering of steel prices may work in the short term, let’s be clear that this is clearly a very unhealthy and unsustainable trend for any growth industry which requires substantial forward looking investments. Deregulation and Free markets mean exactly that – market free from Government pricing interference but having healthy competition. We must agree that the only sustainable way to ensuring low prices is to develop increased supply and capacity at the lowest possible costs and in the most efficient manner. The governments role and public policy objective thereffore becomes one of facilitating the efficient increase in this capacity , increasing competition and ensuring prices to consumers are kept low through a model of intense and sustained competition.

While this is simply stated, there are clearly many issues that form part of this equation to expand and grow the Indian steel Industry. From the numbers I have, I understand that the planned capacity is nearly 243 Million tonnes with investments of over $120 Billion. This is a significant task and to be achieved successfully will require the Government and Public Policy to address the key challenges facing the Industry.

The issues range from Demand side issues like Sustained and predictable Market growth in an Industry known for its demand cyclicality, Input side issues Raw material availability including a clear policy for mineral depletion vis a vis Iron Ore, Expansion of the Transportation and Connectivity for the Sector, Regulation and Pricing issues including well defined Roles of the Government and other institutions of government like CCI vis a vis regulation of the sector.

This FICCI Steel Conclave is designed to address these issues and evolve solutions recommendations and action plans for them. I am confident that if the Government and Industry work in a partnership to plan the way forward, the Indian Steel Industry will over the coming decade become one of global scale and competitiveness.

On behalf of FICCI, I would like to thank Honble Minister for his presence at this conclave and also thank Shri Govindrajan and Shri Pandey for being here this morning and I wish you all fruitful deliberations at this Conclave.

Thank you