Bhubaneswar: Amid the severe raw material crisis owing to closure of mines in several states, the country’s leading steelmaker, Tata Steel has urged the government to take urgent measures to fix the problems in order to attract investments.
India has the raw material advantage and we have to leverage that in order to ensure the growth of steel industry in India,” said TV Narendran, Managing Director, Tata Steel.
Addressing during a national-level symposium on manufacturing industry, he said that an entrepreneur has to face many challenges to set up a plant.
There are many disadvantages in setting up a steel plant in India as compared to countries like Japan & Korea including issues like cost of operation, wage rates, taxation etc. Many people believe that wage cost in India is lower than the developed countries, but the reality is that our wage cost is higher than that of Japan or Korea. Wage cost of Posco (Korea) or Nippon (Japan) is lower than us if we calculate dollar per tonne basis. Their productivity is too much high and that makes a huge difference. Also, cost of enterprise from the tax point of view is high in India. Cost of capital in Japan & Korea is the fraction of the cost of capital in India. So, it is cheaper to set up a plant in those countries than in India.
Mr. Narendran also stated that they do not have raw material in their countries, so they set up plants near the port where big vessels would come and the raw material imported or finished products exported with little cost. On the other hand, we in India have to use the expensive road or rail transport, which is usually 5 times the cost of sea transport from port to plant or plant to port. So the result is, while on FOB (free on board) basis the price of the raw material may be same; on CNF (cost & freight) basis there is a huge gap. So, the ultimate result is import of steel from Japan or Korea to Mumbai is cheaper than getting steel from Jamsedpur.
Therefore, the government should take urgent steps to fix the raw material problem that the steel industry is facing. For growth of economy, we have to add more steel capacity and for this we need more investments. For more investments, we need to look at these issues, he added.
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