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Political Economy of Environmental Pollution In The

Indian Steel Industry

Susmita DasguptaEconomic Research Unit

Joint Plant Committee

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The Indian Steel Industry Is Slammed For Its Pollution

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The Recent Survey on Steel and Environment Pollution

Reveals that the Indian steel plants are rather low on pollution.

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Water pollution

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Co2 emissions in tonnes of carbon/tonne of steel produced

• Global best practice: 1.4

• India’s best is Essar Steel (DRI) 1.4

• Tata Steel 2.7

• Usha Martin (India’s worst) 4.2

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Producing steel in India is thusThrice as polluting as the global best practice.

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Yet, India is steadily going up on the steel scale

WORLD CRUDE STEEL PRODUCTION 2009

Europe, 194.73, 15.88%

C.I.S. (6), 97.36, 7.94%

North America, 82.25, 6.71%

Middle East, 16.59, 1.35%

Africa, 14.84, 1.21%

South America, 37.82, 3.08%

India, 56.61, 4.62%

Rest Asia, 151.88, 12.39%

Oceania, 6.01, 0.49%

China, 567.84, 46.32%

• It is the third largest producer of steel after China and Japan.

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What makes the Indian steel plants so polluting?

• Government denial• Ignoring of mass movements against pollution.• Always assuming that the role of the government

is to promote profits for steel companies.

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Today most community issues around steel are about pollution

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What causes pollution?

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Steel is naturally polluting

• Since it uses coal and iron ore whose combustion releases various PAH compounds and oxides into the air.

• However technological interventions in the form of air filters, water filters and other water saving, power saving and closed container can reduce pollution to near zero emissions.

• Unfortunately, the Indian steel plants, despite using good and standard global technologies do not seem to be able to control pollution.

• The most probable reason is that they do not use the recommended levels of raw materials.

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The crux of pollution then seems to lie in the quality of

poor raw materials

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Let us look at some fundamentals which lead to the poor quality of

raw materials

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The Indian steel industry before economic liberalization

was based upon• Large integrated steel

plants like SAIL and RINL in the public sector and Tata Steel in the private sector

• They produced steel through iron ore.

• A host of smaller electric arc furnaces

• They produced steel through scrap.

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As India’s demand for steel picked due to urbanization and economic growth, the large plants could not supply steel

• So the smaller plants were called upon to fill the gaps.

• As the smaller plants’ production increased, the demand for scrap grew.

• Scrap prices rose.

• DRI industry was born.

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Structure of the Steel Industry

Indian Steel Industry

Integrated Steel = iron + steel

Iron MakingDRI, Corex

Steel makingElectric Arc

Induction Furnace

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How did the DRI people get their iron?

• Through the grant of private leases.

• A legacy of the colonial times.

• Mining is a state subject and is not centrally controlled.

• The public sector also gained from such leases.

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Iron Ore was in fact low value

• One could only use lump haematite ore.

• We were on contract for export to Japan.

• Since the integrated plants had captive mines we relied on private mine owners to export iron ore to Japan.

• Mining was low valued; Japan being a very large buyer pressed prices of ore down.

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The good market was only in lump ore

The fines were usually cast away as waste. Now DRI made good use of

these and also helped replace scrap as feeder in EAF.

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But by 2004, China emerged with a huge appetite

• Started importing iron ore.

• Was it all needed for consumption?

• No; it was a means to buy up commodities because otherwise no country in the world would have the money to buy its products.

• Natural resources was the new opium.

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China’s manufacturing base was so strong that all it could import was

minerals

• A new natural resource economy developed.

• Speculators and financiers were speculating in mineral ores to collect money to be able to buy the Chinese goods.

• Freight business developed.

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Everywhere mineral properties were on the upswing

• There was a rush in Indian mining.

• Super profits for Indian miners.

• They exported out and put the rejects into the rotary kiln for manufacture of DRI.

• This is how the DRI became such a polluting industry.

• It was actually a clean technology.

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In short there was an over export of iron ore

The Karnataka Lokayukta report shows the enormous extent of

illegal mining and exports.

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In fact, even the public sector companies like the NMDC and KIOCL also smuggled iron ore

• And because of rising prices of iron ore, steel prices increased.

• People exported more ore in order to keep steel prices high.

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The more iron ore was exported,

The worse the quality of ore in the DRI kilns got.

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Across the steel sector, the profits soared, but

Production and Consumption of Steel 2010-11

in thousand tonnesProduction for

Sale Imports Exports Consumption

Production less Consumption

In thousand tonnes          

Pig Iron 5541 9 358 5153 388

Sponge Iron (DRI) 26709 0 0 26701 8

Semis for Sale 25272 339 350 25293 -21

Finished Steel 61799 5906 3039 64252 -2453

Source: JPC, 2012

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Finished steel production did not grow

Only iron based products grew

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The reasons were

• Steel production did not yield as much profits to the investors and export of iron did.

• So raw material was diverted.

• The people who had larger market shares only produced steel and there was concentration.

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Iron Ore

• India is one of the richest sources of iron ore.• It has a deposit of 9602 million tonnes of

haematite ore and 3408 magnetite ore.• This can produce 650 million tonnes of steel.• This is ten times the present production.• Or may last us for ten years from now.• The Indian steel industry is expected to grow by

8% annually; which also means that the ores may exhaust in the next ten years.

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There was also one reason for the iron ore trade

• China became a large supplier of coal and coking coal.

• Indian ore exporters also imported coal.

• As coal prices in China rose, less was available for India.

• More iron had to be exchanged to get coal.

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The poor quality of coal

Also caused pollution in steel industry.

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Coal too was over mined illegally

• In some cases it was over exploited and

• In certain cases private allottees just sat over mines to raise coal prices so that they could make profits.

• Many such mine allottees were steel producers, who did not use the coal to make steel but to sit on supplies for super profits.

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And only low quality coal was used

Leading to very high carbon

emissions.

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Pollution Causal Flow

Iron oreTrade becomes

profitable

not BF and DRI Pollution.

Specified qualityOf raw material

Is Used.

Ore is minedPoor qualityWastes are

Used in DRI, BF