Rebar market looks forward to make its way through the roadways of rural areas adjoined to its urban market
Recently, many small time traders in villages have applied for SAIL dealership under ‘SAIL Rural Dealership Scheme’. All these rural traders want to be a part of such scheme which is being promoted by SAIL and RINL.
C.S. Verma, Chairman, SAIL, in an earlier interview to Steel 360 had said that, “the global consumption of Steel is to grow 2.9% in 2013, while India’s steel consumption is expected to grow by 5.9% to 75.8 MnT in 2013, according to the World Steel Association (WSA).” Focusing on Indian rebar market in rural area, he said that “the rural per capita steel consumption in India is around 12-15 kg against the national average of 59 kg the global average of over 215 kg. With 70% of India’s population living in rural India, it gives us an opportunity to promote Steel use in a still near-virgin-market.”
Why Rural Market?
In FY 12, GOI spent over INR 83,000 crore in rural development which is projected to expand to around INR 98,000 crore in FY 14. Indian growth story is better than the developed world, which is receding according to Mr. Verma, who expects a better environment in the coming quarters as significant number of projects has sped up by the Cabinet committee, coupled with USD 1 trillion of investment in infrastructure planned in the current five year plan. As a result, the growth in steel production and consumption is bound to go back to 1.2 times the GDP.
With schemes like National Rural Employment Generation Act (NREGA), growing public investment in rural area, purchasing power of rural India is on the rise. Consequently, higher rural incomes result in increased steel consumption in some form or other. This will get a further fillip when all villages in India get electricity, have water supply and are connected by road. Government, through various schemes, is trying to achieve this target within next 3-5 years. This will provide real opportunity for the growth of rural India and in turn, enhance steel consumption in the country.
Steel Consumption in India
India’s total finished steel production for sale in FY 13 was about 78 MnT, an increase of 2.5% from FY 12. India’s average per capita finish steel consumption stands at about 59 kg compared to a world average of over 215 kg. Further, according to Joint Plant Committee (JPC), the average per capita consumption of finish steel in rural India is a mere 11-12 kg, which is extremely low. These figures strengthen the thought that the domestic steel industry has huge growth potential.
One of the biggest questions to pose here is the fact to understand where will the actual infrastructure development come from? If income levels of rural population is to increase, will they continue to stay in rural areas with poor medical, electricity, sanitation and education facility or move towards urban areas? It is more likely that radius of urban areas will expand more to accommodate such migration. Now, if such migrations happen and rural population heads to urban areas closer to them, secondary steel manufacturers may stand a chance to expand their counters in those areas and benefit. However infrastructure development in rural areas will provide benefit to PSUs. Government will have to look after agricultural development and employment in the rural areas to hold or limit migration from rural to urban areas.