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Working Capital Management On SAIL
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GLOBAL STEEL SCENARIO AND INDIAN STEEL INDUSTRY
INTRODUCTION
Though evidences indicate that iron and steel have been used by for almost 6000 years, the modern form of iron and steel industry came into being only during the 19th century. The growth and development of Iron and Steel Industry in the world until the Second World War was comparatively slower. But the industry has grown very rapidly after the Second War was. World production of steel, which was only 28.3 million tones (MT) in 1900, rose to 695 MT by 1992. The oil crisis of the seventies affected the entire economy of the world including the steel industry. The position started improving after 1983 and peaked at 780 MT in 1989. It starred declining till 1994 (723MT), picked up again to 755.8 in 1995. The World Steel production is around 1132 MT in 2005, registering a growth of 6% over 2004.
HISTORICAL BACKGROUND
The antiquity of man’s use of iron attested by references to that metal both in fragmentary writing & inscriptions that survived ancient civilization of Babylon, Mexico, Egypt, China, India, Greece & Rome. However, it is believed that most of the iron used by pre–historic people might have been obtained by fragment of meteorites and it remained a rare metal for many centuries.
For many years after man learned how to extract iron from its ores, the product probably was so relatively soft and unpredictable, that bronze continued to be preferred for many tools and weapons. Eventually iron replaced the non–ferrous metal for these purposes when man learned how to master the difficult arts of smelting, forging, hardening and tempering iron. Archeological findings in Mesopotamia and Egypt have proved that iron or steel has been in the service o mankind for nearly 6000 years. The origin of the methods used by early man for extracting iron from its ores is unknown. Some have suggested that many learned the method accidentally.
INDIAN HISTORY
Indian history is also replete with references to the usage of iron and steel. Some of the ancient monuments like the famous iron pillar near New Delhi or the massive beams used in the Sun Temple at Konark bear ample testimony to the technological excellence of the Indian metallurgists.
The history of iron in India goes back to the ancient era. Our ancient literary sources like Rig Veda, the Atharva Veda, the Puranas and other Epics are full of references to iron and its uses in peace and war. According to one of the studies, iron has been produced in India for over 3000 years.
OUTLOOK FOR THE INDIAN ECONOMY
After witnessing rapid strides during the years after the liberalization process was set in motion, India’s GDP grew at an average rate of 5.2 % during the period 1998–99 to 2002–03. However, there was a break from the trend in 2003–04, during which the economy is estimated to have grown at more than 8%. The economy of India, measured in USD exchange – rate terms, is the twelfth largest in the world, with a GDP of around $1 trillion (2008). It recorded a GDP growth rate of 9.0% for the fiscal year 2007 – 2008 which makes it the second fastest high emerging economy, after China, in the world. The economy is expected to continue on a high growth path with continued macroeconomic stability.
Over the years there has been a downward trend in interest rates accompanied by moderate inflation and adequate liquidity in economy. In April 2003, the Bank Rate was reduced to 6%, which was a 30 – years low. Commercial Banks have also resorted to sub–PLR lending. With sub PLR lending and reduction in maximum spread over PLR, lending rates have effective come down Infrastructure development has been a focus area for the Government in recent years. In the road and highway network, India is witnessing development of multiple–lane, safe and well designed interstate highways. Recently the Government has announced a planned outlay for the rural road and highway network development. The Golden Quadrilateral Project is an ambitious project that would connect the four major metros via state of the art highways. The East–West and North – South corridors would link up the remotest parts of the country. The Government is also planning to facilitate investments in seaports and airports in a major way.
STEEL DEMAND SCENARIO
India’s steel production is likely to surpass the domestic requirement by 2011–12, easing pressure on prices of the alloy, which has been adding to the spiraling inflation.
“We shall achieve 124 million tons of steel capacity by 2011–12, well exceeding the requirement that would be to the tune of about 110 million tons at that point of time,” Steel Minister Paswan said.
Steel prices shot up by over 50 percent since January, adding to the woes of the UPA government, which is battling a seven–year high inflation of 8.75 percent in its last year. The annual demand for steel in India has been rising by about 13 per cent, but production is growing by over 6 percent, according to official sources. Last fiscal, the country’s crude steel production stood at 53.9 million tons, of which about 5 million tons were exported. To bridge the demand – supply mismatch, India had to import nearly 7 million tons of steel. Steel Secretary R S Pandey while endorsing India becoming a net steel importer from being a net exporter till a few years ago, said the trend is likely to continue for some time as increase in capacity takes at least three to four years.