5 Major Challenges Faced by the Indian Steel Industry

The biggest challenge would be in the human resources area while other challenges would be in infrastructure, building design and engineering capabilities.

India has terrific competitive benefits in the steel industry, but there are some major challenges that are not allowing the industry to graduate to higher production levels. One of the biggest challenge areas for the industry is human resources. Other challenges include capital, low potential utilisation, inferior quality products, low productivity etc.

Capital

Steel industry requires massive capital investment which is a bit too much for a developing country like ours. There are many public sector integrated steel plants that were established with the help of foreign support in India. But this increased volatility in financial markets over the last few years has forced investors to become risk averse. Investors want early returns with short-term investments, but our country’s steel growth from here on will need long-term investments in new technologies and the infrastructure.

Low Productivity

According to India Ratings & Research, India needs to increase its labour productivity growth to 7–8% to achieve a GDP growth rate of 9%. The per capital labour productivity in the country is at 90–100 tonnes for steel industry, whereas it is 600–700 tonnes per person in Korea, Japan, and other steel producing nations. It will require retraining of the workforce to increase the labour productivity.

Low Potential Utilisation

According to a research, the potential usage of steel and iron is quite low. It generally doesn’t exceed 80%. For instance, Durgapur steel plant makes use of approx. 50% of its potential which is caused by factors like strikes, shortage of raw materials, energy crisis, incompetent administration, etc.

Huge Demand

Even after low per capita consumption rate of steel, the demand for iron and steel is increasing every day and huge chunks of iron and steel are to be imported in order to meet the demands. In order to save invaluable foreign exchange, productivity needs to be increased.

Inferior Quality of Products

The weak infrastructure, capital inputs and other facilities eventually lead to a steel making process which is more time-taking, expensive and produces an inferior variety of steel products. And this eventually forces us to import superior quality steel from abroad.

Originally published at www.ofbusiness.com.