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Odisha needs Rs 1,200 cr infrastructure support for downstream steel parks

Fri, 26th Aug 2016 (Source:Business Standard)

Odisha which is emerging as the steel manufacturing hub of the country, requires a total investment of Rs 1,200 crore towards infrastructure development to develop a full-fledged ecosystem for downstream steel industries.

Though Odisha has a nameplate capacity of 21 million tonne (Mt) annually in steel making, hardly 2.6 Mt is consumed within the state. The consumption of finished steel points to the lack of downstream industries despite the presence of steel majors like Tata Steel, Jindal Steel & Power Ltd (JSPL), Jindal Stainless Ltd (JSL) and Bhushan Steel. A report by KPMG has spelt out the roadmap for development of a downstream steel ecosystem in Odisha. This can be achieved with investment in basic infrastructure creation, supply commitments to downstream units and tax concessions.

 

"Being mostly clustered in districts like Jharsuguda, Sundragarh, Sambalpur, Jaipur, Jagatsingpur, Angul, Dhenkanal and Keonjhar, Odisha should develop downstream parks with mother plants, at all these major steel producing destinations in the next 10 years to ensure value addition happening with the state," said KPMG in a report on 'Odisha Industrial Development Plan 2025' prepared jointly with state-owned Industrial Policy and Investment Corporation of Odisha Ltd (Ipicol).

It has suggested establishment of six downstream steel parks at Jharsuguda, Rourkela, Barbil, Paradip, Sambalpur and Dhenkanal for greater value addition of steel within the state with supplies of molten material from the mother plants. KPMG has recommended an investment of Rs 1,200 crore by the state government towards infrastructure development and pegged the land requirement at 3,000 acres with 500 acres of land in each of the six locations.

"Each downstream park has the potential to create employment for approximately 5,000 people," added the report.

States like West Bengal, Maharashtra, Gujarat and Tamil Nadu with employment in the iron and steel making close to half of Odisha, have many times more employment in the metal casting industry than the state. A large proportion of the iron and steel produced in the state are put to value addition in other states like Andhra Pradesh and West Bengal and has resulted in poor growth of the ancillary and downstream industries. Odisha has the lower casting to manufacturing ratio lesser than the neighboring states like Jharkhand, Chhattisgarh and Gujarat.

KPMG has suggested that the state government should bring in a mechanism to enable commitment from the anchor units for supplying of atleast 20 per cent of the intermediate or finished products to the downstream industries in the state. The report says existing equipment and machinery manufacturers in the state should be encouraged to procure at least 20 per cent of their components from the downstream and ancillary industries within Odisha.

"While the state will provide incentives in the form of refunding partially or fully the net VAT (value added tax) and the CST from the commencement of commercial production for anchor industries, the same will be applicable if the anchor industries ensure atleast 20 per cent value addition from with in the state," added the report. Odisha's per capita steel consumption is less than the pan-India average of 60 kg and this offers an enormous scope for downstream units. Says an industry expert: "With all the available resources, Odisha has huge potential for ancillary and downstream industries. The focus should be on reducing cost of steel production and maximizing local consumption."

Odisha is the largest stainless steel producer in the country and has 20 per cent of the country's crude steel making capacity. Opportunities exist in areas like hot rolled coils, strips, cold rolling of hot rolled products, cold-rolled strip, forging products, long products including bars, rods and wires, structural shapes and rails, and tubes, flat products including plates, hot-rolled strip and sheets, and cold-rolled strips and sheets.

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