Scope For Defence Production From ArcelorMittal-SAIL Venture

12 August 2016

Steel minister Choudhary Birender Singh said on Thursday Luxembourg-based ArcelorMittal SA was exploring the possibility of making high-end steel products for use in defence equipment and satellites in a joint venture factory to be set up in India with state-owned Steel Authority of India Ltd (SAIL).

The expansion of the scope of the proposed venture comes in the wake of the emphasis the Narendra Modi administration has placed on local production of defence equipment.

ArcelorMittal had last year reached an understanding with SAIL for studying the feasibility of making auto-grade steel in India.

ArcelorMittal originally wanted to capitalize on the automobile industry’s growing demand for steel in the Indian market as part of its global strategy, while SAIL wanted to develop an edge in this sector and meet the domestic requirement currently met through imports.

Singh told reporters that the joint venture will boost the Make in India drive by making available high-end steel that could be used in defence and satellite industries. “There is an MoU between SAIL and ArcelorMittal. There are two-three things to be sorted out. Once that is done in a couple of months, we hope to get the joint venture moving. It will happen well before December 2016,” said Singh.

“SAIL and ArcelorMittal leadership continues to accord high priority to auto steel joint venture and emphasis is on completing the feasibility report (FR),” ArcelorMittal said in reply to an emailed query from Mint.

To establish a robust domestic industrial defence production base, the government has pruned the list of defence equipment that needed industrial licensing and introduced an online licensing process.

Although the country is among the top 10 nations in military spending and import of defence equipment, only about 35% of defence equipment is manufactured in India, mainly by state-owned companies, according to a 2016 report on defence production by PwC India.

Even when defence products are manufactured domestically, there is a large import component of raw material at both the system and sub-system levels.

The government is also trying to improve per capita consumption of steel and to set up research facilities to build capability for value added steel products, which will fetch better returns for the industry. Due to the global slump in demand and the slowdown in the domestic construction industry, the steel sector is under pressure.

The steel industry accounts for more than Rs.3 trillion of stressed assets in the banking sector. So far, Rs.36,000 crore of bad loans have been restructured, the minister said.

“We have to increase domestic consumption of steel and identify new areas of consumption. We should also focus on original research and add capacity for making futuristic products,” said Singh.


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