Instructions

Answer these Question ns based on the passages.

Passage I
The Indian steel industry, in line with global trends, is at a crossroads, witnessing a resurgent phase of modernization, expansion and consolidation, mainly through mergers and acquisitions. A sector that was moribund just about five years ago because of a worldwide slump in steel prices, the industry has turned the corner and has in fact been vibrant over the past two years. Domestic steel companies, both public and private, are surging ahead on the strength of an unprecedented buoyancy in the economy and the resultant boom in real estate and various infrastructure sectors such as roads and highways, ports and airports. The official figures speak for themselves. Powered by an increased demand for steel from neighbouring China, which has been clocking a 15 per cent sectorial growth annually on account of construction projects in preparation for the Olympics, the steel industry in India has grown by about 10 per cent in the past two years, compared with the global growth rate of about 6 per cent a year. The country’s production of crude steel in 2005-06 stood at 42.1 million tonnes, reflecting an increase of per cent over the previous fiscal. On the other hand, the consumption of steel during the year was pegged at 41.43 million tonnes, a massive growth of 13.88 per cent when compared with the 2004-05 figures. Likewise, the production of sponge iron also increased sharply by 25 percent, from about 10.3 million tonnes in 2004-05 to 12.9 million tonnes in 2005-06. Currently, India is the largest sponge iron producer in the world and ranks seventh among steelproducing countries. The growth in domestic steel consumption is, by and large, in keeping with the International Iron and Steel Institute (IISI) forecast of a 10 percent increase in steel use in 2006. While the IISI has projected the global demand for steel to grow by 4.9 per cent in the medium term up to 2010, it has pegged its forecast for the 2010-15 period at 4.2 per cent annually for the entire world. The IISI says India will lead the consumption growth story with an annual demand of 7.7 per cent, followed by China with 6.2 per cent. More heartening is the indication that the exciting phase in the domestic steel industry is expected to continue for the next five to seven years at the least, in terms of both consumption and production. Already, the growth in steel consumption, as projected by the United Progressive Alliance (UPA) government in the National Steel Policy (NSP) formulated in 2005, stands exceeded by a huge margin. The NSP had conservatively estimated the country’s steel production to grow by 7.3 per cent, with an annual consumption growth of 6.9 per cent. Considering that the past two years have already witnessed a demand growth of over 10 per cent, the government expects the healthy trend to continue during the Eleventh Plan period (2007-12), provided an annual gross domestic product (GDP) growth of 9 per cent is achieved during the period as projected by the Planning Commission. Clearly, for primary steel producers, India is the place to be in as it has the greatest growth potential. Coupled with this are two other major factors. One, India is bestowed with the largest reserves of high-quality ironore in the world. Secondly, the annual per capita consumption of steel in the country is still one of the lowest in the world, at 35 kilograms against the global benchmark of 250400 kg. In effect, the growth story in India is here to stay for quite a few decades in view of the sheer disparity in consumption levels. Not surprising, then, that when the three ore-rich states - Jharkhand, Orissa and Chhattisgarh- threw open their doors, steel-makers of all hues jumped into the fray to sign memoranda of understanding (MoUs) with more than one state government. In all, more than 116 MoUs have already been inked, pledging a total investment of a whopping Rs 3,57,344 crores in the coming years. If all the pledges materialise, the country’s installed steel production capacity will surge to anywhere between 150 million and 180 million tonnes by 2014-15, compared with the conservative NSP target of 110 million tonnes by 2019-20. Orissa signed 43 MoUs to hike its production capacity to 58.04 million tonnes. Not to be left behind, Chhattisgarh entered into 42 MoUs to augment its steel capacity to 19.32 million tonnes, while Jharkhand signed 31 MoUs to increase its capacity to 68.67 million tonnes. The extensive availability of rich iron-ore- the basic raw material for steel-making - in the three states has attracted big global names too who, at the outset, made it clear that they would require captive iron-ore mines to feed their greenfield steel projects. Initially, it was the home-grown Tata Steel that signed an MoU with the Orissa government, in November 2004 for setting up a six-million-tonne plant at an estimated cost of Rs 15,400 crores after the government made a commitment that its ore requirement of 250 million tonnes for a period of 25 years would be met. by the time Pohang Iron and Steel Company (POSCO), the South Korean major and third largest global steel producer, approached the Orissa government, the terms turned out to be far sweeter. Under the MoU signed in June 2005, POSCO plans to set up a 12-million-tonne plant at Paradeep, with an investment of Rs 51,000 crores. The initial proposal was for a 10-milliontonne plant. but there is a catch here. The government has committed itself not only to provide 600 million tonnes of ore on a captive basis for a period of 30 years but also allowing POSCO to export the quality domestic ore for use in its steel plants in Korea. It has demanded the raw material from mines in Sundergarh and Keonjhar districts. Lakshmi N Mittal, the non-resident Indian (NRI) tycoon and world’s biggest steel-maker following the merger of Mittal Steels with the Luxembourg-based Arcelor in June last year, did still better. He put Jharkhand and Orissa in competition by proposing a steel venture in either state, depending upon the terms and incentives and the swiftness in approvals. Jharkhand lost out-owing to litigation over its Chiraia ore mines and for other reasons - to Orissa, which signed an MoU with Mittal Arcelor in December last year for a 12-million-tonne steel plant at Keonjhar.

The state-owned Steel Authority of India Limited (SAIL) also undertook a major exercise to retain its position as the leading integrated steel producer in the country. The steel behemoth announced its “Corporate Plan- 2012,’ envisaging an outlay of Rs. 37,000 crores to upgrade its plants and modernise its operations. Under the plan, expansion programmes are under way in various SAIL units to enhance the total production capacity to 22.9 million tonnes of hot metal from the present 12.5 million tonnes by 2011-12. Late last year, following the merger of IISCO with SAIL, Prime Minister Manmohan Singh laid the foundation stone for the modernisation and expansion of ISP (IISCO Steel Plant) with an investment of Rs 9,592 crores. Mergers of a few more state-owned units with SAIL are on the cards with a view to consolidating public sector share in the steel market. The other public sector steel enterprise, Rashtriya Ispat Nigam Ltd (RINL), is already in the process of implementing an ambitious expansion programme for increasing its liquid steel capacity from the current three million tonnes to 6.3 million tonnes at an estimated cost of Rs 8,692 crores. Launched on May 20, 2006, the project is scheduled for completion by 2008-09. Needless to say, the demand for iron-ore has surged in view of the long-term supply commitments being given by the State governments at a time when the international market prices for the raw material are at a high.

This sparked off a debate among domestic steel-makers on whether liberal ore exports should he permitted, as in the past, or the ore should be conserved to the extent possible in view of the projected demand for steel. The government set up a committee under the Planning Commission, headed by Anwarul Hoda, to recommend changes in the National Mineral Policy. The existing policy permits free exports of iron ore with a ferrous content of less than 64 per cent. For export of high-grade ore with higher ferrous content, a licence is required and is currently canalised through the Minerals and Metals Trading Corporation (MMTC). The Hoda Committee recommended free exports of iron ore with a ferrous content of less than 65 per cent but advocated discontinuation of the existing regime of canalisation and export licensing for the high-grade ore. Instead, the panel suggested free exports of quality ore lumps with ferrous content of more than 65 per cent on payment of an export duty.

Question 4

Which one of the following statements is incorrect?


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