Singapore (Platts)--6Feb2013/608 am EST/1108 GMT

India expects an increase in domestic crude steel production capacity to 300 million mt/year by fiscal 2025-2026, running from April to March, from an estimated 88.4 million mt/year in fiscal 2011-2012, according to a draft of the National Steel Policy 2012 released on Tuesday.

The new policy issued by the Ministry of Steel is aimed to better reflect the needs of the industry given changes in the domestic and global economic environment. The last policy was formulated in 2005.

The ministry has sought comments from the public and stakeholders on the draft policy within 15 days from its release.

India's crude steel production is seen rising to 275 million mt by fiscal 2025-2026 from about 70.4 million mt in fiscal 2011-2012.

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Domestic demand for finished steel is slated to grow from 70.92 million mt to about 202 million mt or 233 million mt in the same period based on an annual GDP growth of 7% and 8%, respectively.

It is assumed in the draft policy that the higher demand over this period would be met primarily through domestic production, accompanied by a zero trade balance where steel imports and exports even out. Data from the steel ministry's Joint Plant Committee showed that India imported 6.8 million mt of finished steel and exported about 4 million mt in fiscal 2011-2012.

REITERATES OPPOSITION TO IRON ORE EXPORTS

The iron ore requirements of the domestic steel industry is expected to grow to as much as 392 million-452 million mt/year by fiscal 2025-2026, from about 115 million mt in 2011-2012.

The policy reiterated the steel ministry's stance that continued exports of iron ore would necessitate the import of large quantities of finished steel that may jeopardize the long-term competitiveness of the industry. The ministry proposed the formation of an inter-ministerial committee that would look at a phased reduction of iron ore exports.

Priority would be given to domestic steelmakers in allocation of iron ore from Indian mines through a transparent process of open bidding, the draft policy said.

The government has also proposed that steelmakers who currently hold captive mining leases but have not yet made investments in or begun operating them, would have to release the leases for other steel producers who might want to bid for them.

It also proposed offering incentives for the beneficiation of low-grade iron ore fines with special emphasis on the manufacture of pellets.

DEVELOP INDIGENOUS COKING COAL RESERVES

The policy forecast India's coking coal requirement to reach 173 million-200 million mt/year by fiscal 2025-2026 from about 43 million mt in 2011-2012. Given limited proven resources of indigenous coking coal, India will remain dependent on imports, sourcing about 85% of its needs from overseas sources, it added.

The steel ministry has proposed that coking coal mines operated by state-owned Coal India Ltd. be de-merged and transferred to a separate state-owned entity. Idle assets lying with CIL could be offered to other state-owned companies to develop, the draft added.

Virgin, undeveloped assets held

by CIL could be auctioned to steelmakers for captive consumption or merchant sales, the policy said.

Promoting investments in washing and beneficiation of low-grade coking coal are among other measures listed in the draft policy.

As in the case of iron ore, the policy saw a need to curb unfettered direct exports of both manganese and chromite ores, especially high-grade ore, while also encouraging investments in beneficiation of low-grade ore.

--Anitha Krishnan, anitha_krishnan@platts.com
--Edited by E Shailaja Nair, shailaja_nair@platts.com

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