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Iron Ore and Steel Sector in India

GS Paper 1

 Syllabus: Economic Geography

 

Source: CCI, ET

 

Context: The Competition Commission of India (CCI) conducted a study on iron ore pricing and exports, highlighting concerns about varied pricing and recommending discouraging iron ore exports in the country.

 

What did CCI say?

AspectDetails
Concerns Raised by CCIThe recent increase in iron ore exports (low value compared to finished products like steel)
Allocation of captive mines to certain players creates entry barriers for others and is against competition
Differential pricing of iron ore for different end-users raises competition concerns.
Key Recommendations by CCICCI discourages iron ore exports due to its non-renewable nature and importance to various industries.
Prioritize export of higher value-added products like finished steel to promote self-reliant India.
Upgrade iron ore quality using cutting-edge technologies to enhance grade.

 

What is Iron Ore?

Iron ore refers to rocks and minerals from which metallic iron can be extracted economically. It typically contains iron oxides, and the primary types include hematite, magnetite, and taconite.

 

Status:

India is self-sufficient in iron ore production. It contributes 7% to global production. India ranks as the 4th largest producer globally. India is the 2nd largest producer of steel in the world after China

 

Distribution of Iron Ore:

  • India is endowed with abundant resources of iron ore, with the largest reserve of iron ore in Asia.
  • The iron ore mines occur in close proximity to the coal fields in the northeastern plateau region which adds to their advantage.
  • States:
    • About 95% of total the reserves of iron ore are located in the States of Odisha, Jharkhand, Chhattisgarh, Karnataka, Goa, Telangana, Andhra Pradesh and Tamil Nadu.
  • Mines:
    • In Odisha, iron ore occurs in a series of hill ranges in Sundergarh, Mayurbhanj and Jhar. The important mines here include Badampahar (Mayurbhaj), Kiruburu (Kendujhar) and Bonai (Sundergarh).
    • Jharkhand has some of the oldest iron ore mines and most of the iron and steel plants are located around them.
      • Important mines include Noamundi and Gua in Poorbi and Pashchimi Singhbhum districts, further extending to Durg, Dantewara and Bailadila.
    • Other regions:
      • Karnataka – Sandur-Hospet area of Ballari district, Baba Budan hills and Kudremukh in Chikkamagaluru district and parts of Shivamogga, Chitradurg and Tumakuru districts.
      • Chandrapur, Bhandara and Ratnagiri districts of Maharashtra; Karimnagar and Warangal districts of Telangana; Kurnool, Cuddapah and Anantapur districts of Andhra Pradesh; Salem and Nilgiris districts of Tamil Nadu
      • Goa has also emerged as an important producer of iron ore.

 

Significance of iron ore:

  • International trade:
    • The two main types of iron ore found in India are haematite and magnetite. It has great demand in the international market due to its superior quality.
  • Industrial use and applications:
    • Iron ore is the source of primary iron for the world’s iron and steel industries.
    • It is therefore essential for the production of steel, which in turn is essential to maintain a strong industrial base. Almost all (98%) iron ore is used in steelmaking.
  • Larger significance:
    • Most part of the economy in the above regions, especially the four states of Jharkhand, West Bengal, Odisha and Chhattisgarh revolves around these raw materials (iron and manganese).

 

Steel sector in India:

The state of the steel sector in India is key to its economy, accounting for 2% of the GDP in FY 21-22. The major steel-producing states include Odisha, Jharkhand, Chhattisgarh, Karnataka, Maharashtra, Gujarat, and West Bengal, with Odisha leading in production.

 

Challenges Faced by the Steel Sector:

ChallengesDetails
Barriers to Setting up Modern Steel Plants:Significant investment is required for modern plants; Reliance on debt financing and high domestic financing costs impact competitiveness
Cyclical Demand and Monsoon Challenges:Demand is influenced by factors like monsoons; Low-demand periods lead to financial strain and plant closures.
Low Per Capita ConsumptionLow per capita steel consumption compared to other developed countries.
Low Investment in R&DDependence on international research increases costs, and outdated technologies hamper competitiveness
Environmental Concerns:The steel industry is a major carbon dioxide producer, and many of the plants don’t adhere to green and EIA guidelines
Impact of EU’s CBAM:EU’s Carbon Border Adjustment Mechanism (CBAM) from January 1, 2026.
Adverse impact on India’s exports of metals like iron, steel, and aluminium products to the EU due to additional environmental scrutiny.

 

Government Initiatives for the Steel Sector in India:

InitiativeDescription
Inclusion of Specialty Steel in the PLI SchemeThe government allocated Rs 6322 crore for a 5-year period to promote speciality steel manufacturing, attract investments, and foster technological advancements.
Green Steel MakingMinistry of Steel constituted 13 Task Forces to discuss and recommend decarbonization strategies, and the sector is part of the National Green Mission for green hydrogen production.
Purvodaya initiativeFacilitates the establishment of greenfield steel clusters in the Eastern states of Chhattisgarh, Jharkhand, West Bengal, Odisha, and Andhra Pradesh.
Steel Scrap Recycling PolicyNotified in 2019, facilitating the establishment of metal scrapping centres for scientific processing and recycling of ferrous scrap, including end-of-life vehicles.
National Steel Policy 2017Formulated to encourage long-term growth for the Indian steel industry by 2030-31, aligning with infrastructure development, the ‘Make-in-India’ initiative, and other government schemes.
Steel and Steel Products (Quality Control) OrderIntroduced to ban sub-standard/defective steel products, ensuring availability of quality steel conforming to relevant BIS standards.
Safety in the Iron & Steel SectorFormulated 25 common minimum Safety Guidelines in consultation with stakeholders, and academia, and in compliance with global standards and the ILO Code of Practice.
National Metallurgist AwardA prestigious award recognizing outstanding contributions of metallurgists in the iron and steel sector, presented by the Ministry of Steel.

 

Conclusion:

Engaging with policymakers and international bodies is crucial to advocate for fair CBAM policies. Collaborative efforts with other industries and countries can address unique challenges in the Indian steel sector.

 

Insta links:

Steel Sector in India

 

Mains Links

Q1. Account for the present location of iron and steel industries away from the source of raw material, by giving examples. (UPSC 2020)

 Q2. Account for the change in the spatial pattern of the Iron and Steel industry in the world. (UPSC 2014)

 

Prelims Links

Which of the following are some important pollutants released by the steel industry in India? (UPSC 2014)

  1. Oxides of sulphur
  2. Oxides of nitrogen
  3. Carbon monoxide
  4. Carbon dioxide

 

Select the correct answer using the code given below:

(a) 1, 3 and 4 only
(b) 2 and 3 only
(c) 1 and 4 only
(d) 1, 2, 3 and 4

 

Ans: D