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How to Set Up an Iron & Steel Manufacturing Unit in India

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Introduction: Iron & Steel Manufacturing Unit in India

The rise of the iron and steel industry is synonymous with modern industrialization. Steel consumption per capita is commonly used to assess the level of industrialization in a country. This is because all other industries rely on steel, which is used to make all types of machinery.

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The rate of industrialization accelerates as soon as the machine manufacturing process gains traction. Thus, in any country's industrial growth dynamics, the iron and steel industry is unquestionably important.

In January 2019, India overtook Japan as the world's second-largest steel producer. In 2019, India was the world's second-largest steel manufacturer, with 111.2 million tonnes (MT) produced.

In FY21, crude steel and finished steel output were 102.49 MT and 94.66 MT, respectively. Crude steel output is predicted to reach 112-114 MT (million tonnes) in FY22, up 8-9 percent YoY, according to CARE Ratings. In FY21, finished steel consumption totaled 93.43 MT.

In FY21, finished steel exports and imports were 10.79 MT and 4.75 MT, respectively. India's exports increased by 121.6 percent YoY in April 2021 compared to April 2020. India exported 8.24 MT of finished steel in FY20.

The availability of raw materials such as iron ore and low-cost labor in India has fueled the rise of the Indian steel industry. As a result, the steel industry has made a significant contribution to India's manufacturing output.

The Indian steel sector is cutting-edge, with cutting-edge steel mills. It has always worked to keep older plants modernized and upgraded to greater energy efficiency levels.

Significance of Iron & Steel Industry

  • It is a modernity indicator; the development of the steel industry is directly related to a country's progress.
  • The iron and steel sector serves as a backbone for a country's physical infrastructure development. • The iron and steel industry provides a strong forward-backward link for a country's industrial infrastructure.
  • The iron and steel industries are crucial for regional development in the areas where they are located.
  • The iron and steel sector helps to develop many other industries, such as the automobile industry.
  • The iron and steel sector has created a large number of jobs, particularly in underdeveloped areas where these industries are located.
  • The transportation sector, such as roads, railways, airways, and waterways, benefited from the iron and steel industry.
  • The iron and steel industry is critical to India's research and development sector's growth.

Important Factors of the Iron and Steel Industry

The iron and steel industry employs a huge amount of heavy and weight-losing raw materials, and its location is largely determined by raw material availability. Other factors, which are addressed below, do play a role in the location of the iron and steel industry:

Raw material

  • Because the iron and steel industry consumes a huge amount of weight-losing raw material, its location is essentially determined by raw material availability.
  • Jharkhand, West Bengal, Orissa, and Chhattisgarh are home to the majority of India's iron and steel plants, including Jamshedpur, Burnpur, Durgapur, Rourkela, Bhilai, and Bokaro. These states have large resources of coal and iron ore, and they are major producers of these minerals.
  • Visveswaraya Iron and Steel Works in Bhadravati is a notable exception, as it is located far from the country's main coal-producing districts. Previously, this center had to rely on locally available charcoal. It now runs on Sharavati Power Project hydroelectricity.
  • Manganese, limestone, dolomite, chromite, silica, and other raw minerals are used in this business. These raw materials are utilized in modest amounts and are quite easy to transport. As a result, they have no significant impact on the industry's localization.

Market

  • Market availability is another major factor impacting the iron and steel industry's localization. Steel products from an integrated steel mill are bulky, and the transport cost per tonne-kilometer of steel products is expected to be three times higher than coal or iron ore.
  • As a result, numerous iron and steel manufacturing centers are drawn by the market, based on the notion of minimum transit costs.
  • The automobile sector, which seeks a market location, is one of the steel industry's primary users. These industries have also increased the importance of the iron and steel industry's market.
  • Scrap accounts for over half of the metal melted in the world's iron and steel furnaces. Scrap iron comes primarily from industrialized areas, particularly those with steel-consuming enterprises. As a consumer of steel and a producer of raw materials, the market has a dual attraction. Scrap as a raw resource, on the other hand, is failed to gain traction in India.

Transportation

  • Bulky raw materials and finished products necessitate large transportation infrastructures.
  • The location of the Iron and Steel Industry is influenced by the most cost-effective transportation of raw materials from the source to the market.
  • However, the establishment of big integrated steel plants stimulated infrastructure growth in these areas, particularly road and rail.

Technology

  • Scrap has become a highly important raw material in this business as open-hearth techniques have grown in favor.
  • Scraps (1/3 of the world's raw material) are used in this procedure. It's easier to transport in its natural state.
  • Recent transportation technical advancements, the use of scrap as raw material, and agglomeration economics have made market-oriented positioning more lucrative than ever before.

Port location

  • The port's location makes transportation simple and inexpensive. These are extremely useful for importing raw materials and exporting finished goods. Seaport locations are preferable when some fundamental raw materials must be imported or finished steel must be exported.
  • Port locations have the added benefit of quick and inexpensive transportation; for example, the Vizag Steel Plant is an excellent example of this type of location.

Government Policy

  • The government bears the ultimate duty for balanced regional development, and as a result, the government has made significant investments in backward areas to develop these sectors, such as in Jharkhand, Orissa, and Chhattisgarh. As a result, this strategy was consistent with the Growth Pole and Growth Centre principle of the Trickle-Down Theory.
  • Political lobbying, political opposition, and strategic requirements can all have an impact on where it is located. VIEW (Bhadaravati), for example, was established to meet defined requirements.

Labour

  • This industry requires cheap and plentiful labor. As a result, West Bengal and the surrounding areas are ideal industrial locations for the iron and steel industry.

Licenses Required for the Iron and Steel Industry

Trademark:- We know you have worked very hard to finalize a name/logo/tagline for your business. Let’s protect it from unauthorized use. 

  • A trademark is a logo/name/tagline/brand name etc. that is used or intended to be used to identify one company from the other. 
  • Trademarks include words, names, symbols, logos, etc. Anything that classifies your company can be a trademark, provided that it is for goods.
  • Trademarks are central business tools as they allow companies to establish their product's market image without having to worry that an inferior product will weaken their brand image or profit by misleading the consumer.
  • A registered trademark highly increases the legal protections offered to your brand.
  • Trademarks act asacthield to protect your brand.
  • Enlist us so that you have the freedom of mind to focus on your core business activities.

MSME/SSI Registration

MSME/SSI Registration:- MSME is the registration of Micro Small and Medium enterprises. This registration is also termed Udyog Aadhar or Laghu Udyog. Under this registration, the entities are divided into micro or small, medium enterprises as per their investment in the manufacturing business or in-service sector.

The main advantage to the business entity from MSME Registration is that it provides recognition to the business by providing a unique number to the entity. According to the MSME data, this MSME sector contributes about 50% of total export, 45% of total Industrial Employment, and about 95% of industrial units in which more than 6000 products are manufactured. With the growth of these MSME industries, there will be growth in the economy and reduced unemployment too by employing a good volume of unskilled and semi-skilled people. The industries registered under MSME are also known as SSI i.e. small-scale industries.

GST Registration

GST Registration:- GST stands for goods and service tax, introduced in India on 1st July 2017 and replaced around 15 other cascading taxes levied by the Central and State governments. Under GST, goods and services are taxed at different rates as per the categories defined by the Indian Government. Various tax slabs are 0%, 5%, 12%, 18% and 28%. There is a special rate of 0.25% on rough precious and semi-precious stones and 3% on gold. In addition to this, a CESS of 22% on top of 28% GST applies to luxury items like aerated drinks, luxury cars, and tobacco products. 

GST replaced other indirect taxes and is thus set to dramatically reshape the country's 2.274 trillion-dollar economy. GST registration is compulsory for all businesses involved in the buying/selling of products or providing services or both within India.

IEC Registration

IEC Registration:- The Importer-Exporter Code (IEC) is a necessary corporate identifying number for exports and imports. No one may import or export without first obtaining an IEC Number from the DGFT. The IEC will be necessary only when the service or technology provider is taking advantage of the Foreign Trade Policy or dealing with specific services or technologies while importing or exporting services or technology.

The type of company that applies for an IEC might be "Proprietorship, Partnership, LLP, Limited Company, Trust, HUF, and Society." The IEC number is the same as the firm's PAN since the implementation of GST. The IEC would be issued separately by DGFT.

EPF Registration

EPF Registration:- The Employee Provident Fund is a specialist fund designed to provide retirement and other ancillary benefits to salaried workers. If certain requirements are completed, all organizations must register with the above. The term "employee" is defined in the Employees Provident Funds and Miscellaneous Provisions Act of 1952 to include any type of worker who receives a fixed proportion of salary. The employer must meet particular requirements of the act to be eligible to register under the EPF. This act would apply to all establishments in India under section 2(3). Apart from that, the employer must meet the following requirements for employee provident fund registration:

  • Every establishment or institution that is listed in Schedule I of the Act would be required to register.
  • Under this act, all institutions must hire at least 20 workers and employees.
  • If the Central Government informs a specific industry to comply with the provisions, this act will apply.
  • Institutions and establishments with less than 20 employees can also use this act's voluntary registration process.
  • To be considered for Employee Provident Fund registration, any kind of society that is registered and constituted under the Cooperative Society Act must have 50 workers or employees.

The provisions of the EPF must be followed by any company. If a corporation fails to comply with the registration requirement, it will be subject to a penalty. Compliance means that within one month of hiring more than 20 people, the company must register with this organization.

Every employee is given a UAN and EPF number under this act. Even if your employer changes, your EPF number remains the same.

ESI Registration

ESI Registration:- Employee State Insurance (ESI) is administered by the Employee State Insurance Corporation (ESIC), an autonomous organization within the Ministry of Labour and Employment of the Government of India.

For Indian laborers, the ESI program was established. Under the ESI Act, workers are entitled to a wide range of medical, monetary, and other benefits as a result of employer and employee contributions to the ESI scheme.

Why You Should Invest In the Iron and Steel Industry

With a crude steel output of 9.8 MT in October 2021, India was the world's second-largest producer. The production of crude steel and finished steel in FY22 (till January) was 98.39 MT and 92.82 MT, respectively. Due to increased consumer demand, India's crude steel production is expected to increase by 18% in FY22, reaching 120 million tonnes. The availability of raw materials such as iron ore and low-cost labor in India has fueled the rise of the Indian steel industry. As a result, the steel industry has made a significant contribution to India's manufacturing output. The Indian steel sector is cutting-edge, with cutting-edge steel mills. It has always worked to keep older plants modernized and upgraded to greater energy efficiency levels. Major producers, main producers, and secondary producers are the three types of steel producers in India.

In FY22 (till January), the production of crude steel and finished steel stood a 98.39 MT and 92.82 MT, respectively. According to CARE Ratings, crude steel production is expected to reach 112-114 MT (million tonnes), an increase of 8-9% YoY in FY22. The consumption of finished steel stood at 86.3 MT in FY22 (till January). Between April 2021-January 2022, the consumption of finished steel stood at 86.3 MT. In January 2022, India's finished steel consumption stood at 9.65 MT. In FY22 (until February 2022), exports and imports of finished steel stood at 12.2 MT and 4.3 MT, respectively. In April 2021, India's export rose by 121.6% YoY, compared with 2020. In FY21, India exported 9.49 MT of finished steel.

GOVERNMENT INITIATIVES

Some of the other recent government initiatives in this sector are as follows:

  • The government released rules for the approved specialty steel production-linked incentive (PLI) scheme in October 2021.
  • In October 2021, India and Russia inked an MoU to collaborate on steel R&D and coking coal production (used in steelmaking).
  • The production-linked incentive (PLI) plan for specialty steel was approved by the Union Cabinet in July 2021. The scheme is expected to bring in Rs. 400 billion (US$ 5.37 billion) in investment and increase specialty steel capacity by 25 million tonnes (MT) to 42 MT in FY27, up from 18 MT in FY21.
  • In June 2021, Mr. Dharmendra Pradhan, Minister of Steel, Petroleum and Natural Gas, spoke at the Indian Institute of Metals' webinar on "Making Eastern India a Manufacturing Hub about Metallurgical Industries." 'Mission Purvodaya' was launched in 2020 with the goal of accelerating the development of India's eastern states (Odisha, Jharkhand, Chhattisgarh, West Bengal, and the northern part of Andhra Pradesh) by establishing an integrated steel hub in Kolkata. Eastern India has the ability to add more than 75% of India's additional steel capacity. More than 200 MT of the 300 MT capacity is predicted to come from this region alone by 2030-31.
  • JSW Steel, CSIR-National Chemical Lab (NCL), Scottish Development International (SDI), and India H2 Alliance (IH2A) teamed up in June 2021 to commercialize hydrogen in the steel and cement industries.
  • The government allocated Rs. 47 crore (US$ 6.2 million) to the Ministry of Steel in the Union Budget 2022-23. The budget prioritizes infrastructure and industry to help the economy grow.
  • In addition, increased spending on essential sectors including defense, railways, roads, transportation, and highways would boost steel consumption.
  • The Ministry of Steel of India and the Ministry of Economy, Trade, and Industry of Japan signed a Memorandum of Cooperation (MoC) in January 2021 to strengthen the steel sector through cooperative initiatives under the India–Japan Steel Dialogue.
  • The Union Cabinet of India approved the National Steel Policy (NSP) 2017 with the goal of making India a globally competitive steel producer. By 2030-31, the NSP projects 300 million tonnes (MT) of steel-making capacity and 160 kg per capita steel consumption.
  • The Ministry of Steel is facilitating the establishment of an industry-driven Steel Research and Technology Mission of India (SRTMI) in collaboration with public and private sector steel companies, with an initial corpus of Rs. 200 crores (US$ 30 million) to spearhead research and development activities in the iron and steel industry.
  • The Indian government hiked import tariffs on most steel products twice, each time by 2.5 percent, and slapped anti-dumping and safeguard charges on iron and steel products.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.

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Author
Surbhit Sharma
I have worked for many internet blog pages and news portals. currently, I am working as a content writer for Corpseed Pvt. Ltd. I like to write blogs and articles in the field of different services.

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