State Of The Economy 2017

On A Wing And A Prayer

Even as steel manufacturers in Raipur fight a challenging macro-environment, they are betting on increased infrastructure spend to revive demand in the coming year

Vishal Koul

 

It’s quite unusual to find fully occupied hotel rooms in a city like Raipur in Chhattisgarh. As we struggle looking for a place to put up, a localite tells us that the hospitality industry there is booming with most hotel rooms being booked by visitors. The effect of demonetisation was not to be seen. However, a stark contrast awaited us in the adjoining industrial cluster, Urla. Things aren’t as busy as Raipur here. The industrial hub, which is about 30 kms from Raipur, is the key driver of economic activity in the surrounding areas and houses about 70 small to medium-sized steel units. Along with products such as rods, bars, wires, which are used in building roads, construction materials and sliding materials for railways, flat products such as sheets and plates used for fabrication and housing materials are manufactured in these units. The cluster has an annual sales turnover of about Rs.10,000 crore, and caters mainly to the domestic market. 

Of the 70 units that are operating in the cluster, about 17 of them are believed to have applied for closure. It is not a smooth ride even for other operating units. With 20-30% fall in demand and prices, small steel plants are finding it difficult to recover their operating costs. The cost of raw material has increased by 10-30% over the past six months. “Almost all the steel producers in this cluster are currently incurring a loss of Rs.1,100-1,500 a tonne as a result of slackening demand, lower steel prices and high raw material costs. It is difficult to survive just on the hope that things would improve,” says Manish Dhuppad, managing director, Chhattisgarh Ferro Trades, who is also the general secretary of Chhattisgarh Mini Steel Plant Association. 

Urla has attracted many small entrepreneurs, thanks to supportive government policies and easy accessibility to iron ore. National Mineral Development Corporation (NMDC), which is India’s largest iron ore mining company, has some of its largest mining projects in Chhattisgarh. “Steel is the backbone of Chhattisgarh. The formation of industrial units at Urla in 1982-83 has now become a major

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