State Of The Economy 2016

No rock and roll

The steel re-rolling industry has all but flattened out. Can government intervention save the units?

photographs: Soumik Kar

Dumping of cheap steel, weak demand and a drop in production has ravaged the steel industry in the country. It is no different at the Butibori industrial belt, a cluster developed by the MIDC, about 27 km south of Nagpur. The steel re-rollers here tell a woeful tale of an industry that has all but flattened out. Neeraj Aggarwal, who owns a re-rolling business called Shyambaba Re-Rollers, has shut his plant for now. With dismal prospects for his business, he sees Butibori turning into Detroit, a ghost town that once housed a vibrant auto industry.

“While steel prices have fallen to their lowest, as seen in 2010, input costs such as fuel and raw material prices have been increasing. Also, much of the demand is being taken over by cheap Chinese imports, leaving little incremental demand for Indian producers,” he says. Aggarwal, however, makes a distinction between smaller and larger units. “The medium-sized steel re-rolling units in Butibori are supplying to large corporates, and hence getting better margins. Smaller units do not have this luxury and are on the verge of closure or have already shut shop.” 

About half of the re-rolling and steel related mills in Butibori have shifted from 24-hour work shifts to eight-hour shifts, cutting production in the face of falling demand. Others are specialising into niche products, where margins are higher. At Shilpa Steel and Power, one of the biggest steel re-rollers in the cluster, the sentiment is not as bad. “Business has been lukewarm. But while steel prices have fallen, we have not cut our production,” says promoter Karan Bagaria. Set up in 1989, Shilpa Steel manufactures re-rolled steel including angles, brackets, channels and beams. It has a capacity of 1 lakh tonne per annum for rolling mills, 17,000 tonnes for towers and 12,000 tonnes for fasteners.

Fickle power
Butibori is not only suffering the brunt of low demand, but also unreliable power. Power prices are high and fluctuate based on MSEB whims. The body either decides to give a rebate and cuts prices or decides to charge more for transmission and distribution losses. To counter this, companies use induction furnaces and pre-heat treatment furnaces. “Purchasing power from third-party sources is v

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