Annex 2
Note for discussion
Indian Steel Sector
Background
Presently India is the fourth largest producer of crude steel and the largest producer of sponge
iron in the world. However in terms of techno economic efficiency of operations, the steel
making units are nowhere near their global competitors. The industry in fact continues to be
characterized by low labour productivity and high energy consumption levels, heavy dependence
on imported technology, low priority for Research & Development initiatives and diversification.
For improving the sectoral performance and competitiveness there is an urgent need to address
its basic structural constraints irrespective of equity size and nature of operations. These efforts
will also have to cover every phase of steel making as a manufacturing process i.e. from
accessing of raw materials to its processing, finishing, quality control, transportation etc.
In the course of its evolution over the last several decades, the structure of Indian Iron and Steel
Industry has become extremely diverse in terms of scale of operation/size, integration levels,
process routes and levels of technological sophistication. In consonance with the stages of
evolution of the industry and keeping in view the requirements of inter-temporal continuity in
systems of data collection, the Joint Plant Committee (JPC) has classified the Indian steel
producers into three broad groups for dissemination of official data. The paper herein will be
discussed on the Electric Arc Furnace (EAF) and Electric Induction Furnace (EIF).
In fact, today domestic steel making is dominated by the private players. During 2010-11, the
private sector units accounted for 75% of the total crude steel production and 80% of finished
steel production in the country. In terms of choice of technology, production through oxygen
route remains the dominant steel making technology in the country with a share of 44%.
However, the unique feature of our steel industry has been the emergence of the electric steel
making route, especially the Induction Furnace (IF) units, whose share in total crude steel
production is today as high as 32% with the remaining 24% accounted for by the EAF route as
shown in Table below:
Indian Crude Steel production by Process Route (Percentage Share)
Process Route
Induction furnace (IF)
2005-06
29%
2010-11 (P)
32%
Basic Oxygen Furnace
53%
44%
Electric Arc Furnace (EAF)
18%
24%
Total
100%
100%
This category includes the mini steel plants - mainly the Electric Arc Furnace (EAF) and
Induction Furnace (IF) units - with capacity below 0.5 million tonnes as also all EOF units.
Besides it also covers the stand-alone processors without backward integration of steel making
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like the Re-rolling (RR) units, Cold Rolling (CR) units, GP/GC Sheets units, Pig Iron & Sponge
Iron Plants, etc.
Indian steel industry has witnessed substantial growth in the 60‘s and 70‘s. There was a period of
stagnation from the 70‘s to 90‘s when no new capacity was added nor was there any
modernization /expansion of the existing plants. Early, 90‘s saw liberalization, when new plants
with state-of-the –art technologies were set up in the private sector. In the interim period,
existing steel plants of SAIL and Tata Steel were also modernized and expanded to adopt some
of the modern technologies. With liberalization and deregulation of the steel sector, a large
number of coal based sponge iron and electric Induction Furnaces have also come up in the
country and today India is the largest producer of coal based sponge iron as well as induction
furnace based steel in the world. Besides, the country also boasts of a large number of Rolling
Mills and Processing Mills.
The Indian steel industry is, thus, characterized by a mix of old and new technologies together
with integrated and stand-alone mills, and the different technologies and process routes currently
in use are summarized as below:
a. Coke Oven - Blast Furnace (BF) -Basic Oxygen Furnace (BOF) /Twin Hearth Furnace(THF)
using Coking Coal and Iron Ore (Lumps/Sinters) as basic inputs for production of steel flat &
long products.
b. COREX – Basic Oxygen Furnace (BOF) using non-coking coal and iron ore (lumps/pellets)
as basic inputs for production of steel flat product.
c. Direct Reduced Iron (DRI) – Electric Arc Furnace (EAF)/Electric Induction Furnaces (EIF)
using Natural Gas/Non coking Coal and iron ore (lumps/pellets) as basic inputs for steel
production.
d. Standalone Electric Induction Furnaces using steel scrap and sponge iron as basic inputs
mainly for production of steel semis & long products.
EIF
Electric Induction Furnace (EIF) steel making: India is the largest producer of induction furnaces
as well as the largest producer of steel adopting the Induction Furnaces technology. The industry
has grown not only in terms of overall capacity but also in terms of sizes of furnaces. Today,
EIFs upto 40 tonnes capacity are in operation in the country.
Electric Steel Making
a) EAF Steel Making: A few plants in this segment, particularly those which are of large size, are
world class and have adopted most of the state-of-art-technologies for higher productivity, lower
energy consumption and reduced environment pollution. However, others, particularly those in
smaller sizes, are burdened with technological obsolescence. State-of-the-art-technologies like
Ultra High Power (UHP) furnaces with ratings of 0.9-1 MW/tonne, Oxy-fuel (side) burners, roof
burners, water cooled electrode holders economizers, continuous feeding through delta region,
enlarged shell for single charging, eccentric bottom tapping (for slag free tapping),
electromagnetic stirrer (EMS), utilization of waste heat for scrap preheating (Finger Shaft
Furnace, Echo-Arc Furnace), are recommended for adoption in the EAF sector in India to ensure
increased productivity, reduced energy and electrode consumption and improved environment
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friendliness. Adoption of these technologies may be considered on priority by the EAF based
mini steel plants through technological upgradation of existing facilities or phasing out of
obsolete facilities. Use of hot metal in EAF is a well established technology to reduce electric
power consumption and may be tried wherever feasible.
b) Electric Induction Furnace: The IF industry is also undergoing changes in terms of its size
profile, adoption of continuous casting and secondary refining etc. However these improvements
are not broad-based and are required to be adopted extensively across the segment for its
survival. Technological limitations of this sector need to be dressed urgently through suitable
technological interventions and directed efforts are necessary on the part of both the industry and
the Government. These may include finding out ways and means to refine the steel, if possible in
the IF proper or outside the IF (Ladle Refining Furnace/ Induction Refining Furnace) to reduce
the harmful elements viz Sulphur, Phosphorous, inclusions, slag entrapment etc. and thereby
enabling these producers to make quality steel as per relevant standards.
Barriers in EIF:
About 40% of India‘s crude steel is produced by the mini steel plants comprising of Electric Arc
Furnace (EAF) and Electric Induction Furnace (EIF) units. Besides more than 60% of long steel
products are also produced by the Secondary Steel Sector i.e., the EAF, EIF as well as the Rerolling Mills. The Re-rolling Mills normally source their inputs, viz., pencil ingots and
continuously cast billets, mostly from the EAF and EIF units. All these units are characterized by
high levels of energy consumption and Green House Gas (CHG) emissions. Therefore, adoption
of clean, green and energy efficient technology by them has become over the years a subject
requiring special attention both from the point of view of improving their productivity as well as
for ensuring environment protection. The Ministry of Steel has devised a New Scheme for
improving energy efficiency of the Secondary Steel sector –
Though, over 30% steel is produced in India adopting the EIF route, the sector has technological
limitations to refine the steel which is necessary to produce quality steel with respect to low
sulphur, low phosphorous and low inclusions as required by national/international standards. The
problem is more acute for those who do not get good quality shredded scrap and hence forced to
use coal based DRI, pig iron and cast iron. A large number of units have recently set up captive
DRI facilities. Notwithstanding the technological limitations, with increasing demand for quality
steel, some of these units have taken initiatives for producing quality steel by using shredded
scrap with/without part DRI or a mix of DRI (70-80%) and pig iron. A few units have also set up
tiny BFs/ Cupola Furnaces to produce hot metal in EIFs to reduce electric power consumption to
the extent possible. Also a few units have set up secondary refining vessels in their endeavor to
produce quality steel as far as possible.
Notwithstanding their technological limitations to produce quality steel, Electric Induction
Furnaces (EIF) account for over 30% of steel production in the country. One of the most critical
problems with the process is its limitation to refine steel to reduce phosphorous content below
the desired limits. Higher phosphorous and pick up of nitrogen during induction melting make
the final product hard and brittle and unusable for many critical applications. Besides, the quality
of sponge iron, which is sourced mostly from coal based production units, is also of poor quality,
particularly in terms of metallization and phosphorus content. Because of these drawbacks,
higher use of DRI in EIF results in low yield and higher energy/power consumption as well as
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higher phosphorous in the steel. Solutions to these problems need to be found out, if the EIF
route is to sustain production in the long run.
Most of the Induction Furnace units are engaged in production of mild steel ingots/billets and
long products for mass consumption. Some are also producing stainless steel sheets for utensils.
Most of the units are also dependent on State Electricity Boards (SEBs) for electricity, which is
costly in most of the states. This makes them uncompetitive and the production capacity of this
industry remains underutilized.
Proactive Action by Ministry of Steel:
During the 11th Five Year Plan Government had allocated Rs. 118 crore for Promotion of R&D
in Iron and Steel Sector. under this Scheme research initiatives aimed at three broad areas
namely,
a) Development of innovative/ path breaking technologies for utilization of iron ore fines and
non-coking coal.
b) Beneficiation of raw materials like iron ore, coal etc. and agglomeration.
c) Improvement in quality of steel produced through the induction furnace.
Proactive Action for improvement in various Steel Sectors:
The EAF sector is well equipped to produce quality steel but their energy consumption levels are
relatively higher. To addressed this issue there are a number of established technologies currently
available for the sector viz. Oxygen assisted melting, oxygen fuel burner ( side
wall/roof),Eccentric Bottom Trapping etc but the problem is that the use of these technologies
remain restricted mainly on account financial reasons i.e. the high capital expenditure involved
and the limited resources of the small and medium level enterprises. Therefore it is proposed that
under above scheme suitable incentives may be provided to the sector in the form of subsidy @
5% on the loan taken from financial institutions or commercial banks. The financial implication
involved for this segment of the sector as per tentative estimates, may work out to around Rs 30
crores to be dispersed over a period of next ten years i.e. 12th and 13th plan.
In the case of EIF sector, over the years a large number of small furnaces (one to five tonne
capacity) have mushroomed and they are mostly engaged in production of mild steel for
construction purposes. While the energy consumption of EIF units using steel scrap as input may
be low but that of other units using very high sponge iron with pig/cast iron as inputs it may be
much higher. The issue can be partially addressed by phasing out of smaller furnaces and
installing bigger ones, setting up additional vessels with Oxygen(O2) lancing for refining work,
phasing out of ingot casting by continuous casting, synchronisation/sequence casting etc. These
are all technical options requiring high capital investment and therefore at present not
economically viable. Therefore to promote adoption of energy efficiency EIF units may also be
covered under the above scheme. Based on an interest subsidy @ 5% the total tentative financial
implications for
this segment of the industry may works out to Rs 60 crores during the 12th &13 th plan
In the Rerolling segment of the secondary sector, most of the units covered are very small and
they find it difficult to invest in energy efficient technologies like regenerative burners in
reheating furnaces as well as go in for design modification in the mill /furnace. If these units are
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also covered under the proposed new scheme for improving their energy efficiency then the total
tentative cost implication involved works out to Rs 40 crores for next ten years 12 and 13 plan.
As regards the Coal based Direct Reduced Iron (DRI) sector, the technical options available for
improving energy efficiency include setting up of waste heat recovery project that will enable
power generation and replace equivalent fossil fuel consumption. A few units have already
adopted this technology but to encourage its spread to other units this segment may also be
brought under the above scheme. The tentative financial implication based on an interest subsidy
@5% may work out accordingly to Rs 330 crores to be dispersed over a loan period of 10 years
i.e. covering the 12th and 13th plan.
It is the financial implications that are largely stalling adoption of energy efficient technologies
by the secondary steel sector and the proposed scheme intends to assist them by helping to cover
a part of the huge costs of the required project investments. However details of the scheme ( the
scope ,targeted beneficiaries, actual fund requirements ,mode of implementation etc) can only be
finalised after discussions amongst all the stakeholders concerned which may require
constitution of a Task Force by the ministry with representatives of various segments of the
secondary steel sector , experts and other stakeholders.
Details of the segment wise tentative estimates for the above mentioned scheme are given at in
the table below.
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Integration of Aus-Aid program with the Ministry of Steel in the 12th Plan
Initiatives by UNDP
1. The initiative to expand Energy Efficiency in steel sector emanated from a National
Conference on “Improving Energy Efficiency in Indian Secondary Steel Sector Including
Steel Re-Rolling Mills” organized by FICCI (at Federation House) on 7 December 2010,
where Hon’ble Minister of Ministry of Steel presided. Discussions between Minister,
Secretary and our Country Director motivated us to further our efforts in steel sector. We got
the component of EE in small steel included in the first opportunity when UNDP initiated an
imitative in collaboration with AusAid.
1. UNDP and Ministry of Steel are already engaged in executing a project on improving energy
efficiency in Steel Re-rolling Mill sector in India. The main aim of the project is to accelerate
the penetration of Energy Efficient (EE) technologies by removing barriers related to
technical, awareness, service providers and capacity building.
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2. The project is now moving smoothly and has provided interesting results. 29 model units are
already implemented. Post commissioning measurements have been done in 16 model units.
The value of energy saved in these units amounts to 36 Crore Rs (272 Terra joules of thermal
energy equivalent to 6800 tonnes of furnace oil and 11 million units of electricity saved, 25%
reduction energy) while the investment was 22 Crore. 60% of the investment came from
industry, 20% was subsidy from MoS and 20% from GEF grants as Technical Assistance.
Three of the Project’s Model units have received Energy Conservation Awards (M/s MPK
Steel Pvt. Ltd - Rajasthan Energy Conservation Award for year 2009-2010; M/s Pulkit Steel
Rolling Mills-Renewable Energy Agency of Puducherry ; Shree Prithvi steel Rolling Mills Rajasthan Energy Conservation Award for year 2008- 2009 and National Energy
Conservation Award for year 2009-2010). These initiatives are in conformance with the
Planned expenditure and the approval by the Planning commission in the Steel Sector both in
the 11th Plan as well as in the forthcoming 12th Plan.
3. The present project while focused on Steel Re-rolling mill sector the interest for interventions
in Induction Furnace which is equally important, perhaps generated more Greenhouse Gases
emissions than SRRM came from Industry association. In the 17th Project Steering
Committee meeting of Project held on 28th Dec 2011, the Chairman, AIIFA (All India
Induction Furnace Association) requested to include induction furnace in similar projects, to
help the sector to improve quality of products, efficiency & reduce energy consumption.
PSC apparently took note of the same and desired to something.
4. The AusAid project aims to demonstrate Energy interventions in a few model units (four
nos.) with the limited amount. Our discussions with stakeholders revealed some subsidy can
only catalyse the huge investment that they have to make. Perhaps about Rs 1 to 2 Crore per
unit. There are approximately 900 induction furnace units and the learning’s from study can
be replicated. estimates that there will be approx. We understand that at least 100 kWh of
electricity per tonne of steel can be saved due to energy interventions. This industry supplies
raw material to rolling mills. Hence, any intervention in this sector will affect directly or
indirectly the complete secondary sector. Though induction furnace is the major link in the
supply chain of the sector and there has been little or no major interventions on energy
efficiency.
5. As indicated in the discussion paper in the 12th Plan, R&D in the Induction Furnaces will be
supported by the central Budget and the UNDP support shall provide an impetus to the action
of the Central Government and will provide an enabling framework due to the partial
implementation in the Induction Furnace. The Learning shall be based on the collective
experiences of Steel re-rolling mill project and would be rolled in the new initiative in EE in
Induction Furnace.
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