Chhattisgarh Could See 175 Steel Mills Shut Down, 50,000 Jobs Lost

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Researched by Industrial Info Resources (Sugar Land, Texas)--The owners of 175 steel mills in central India's mineral-rich state of Chhattisgarh have threatened to close their plants due to a shortage and the rising prices of sponge iron, which will lead to job losses of about 50,000.

In the absence of government intervention, steel production in India will be hit severely if the mills stop production starting December 1, as they have a combined monthly output of 350,000 tonnes, which is 27% of India's total production.

Steel industry watchers say a closure also will affect the 76 sponge-iron units in Chhattisgarh.

Chhattisgarh earlier had 125 sponge-iron units, the monthly production of which was about 350,000 tonnes, which was 35% of the country's total output.

Operators of sponge-iron units in Chhattisgarh have been complaining of a shortage in iron-ore supply for the last two years, and a large number of units were forced to shut down. The 125 sponge iron units required 12 million tonnes of iron ore a year, but used to get only 3 million tonnes. There are three iron-ore mines in the Bailadila hills of Chhattisgarh's Dantewada district that produce 20.5 million tonnes.

According to Ashok Surana, the president of Chhattisgarh Mini Steel Plants Association, "The per-tonne price of sponge iron has shot up from 14,000 to 18,000 rupees ($300 to $400), and it is not even available as per our needs. As a result, we have no option but to start closing the units from December 1.

"We are going through one of the worst phases and need a little bit of support from the government, but since the government is not ready to step in, we have no option but to shut down units. It will directly hit the 50,000 workers employed with the 175 units."

Surana said that mini-steel mill owners had sought immediate intervention from the state government in the way of a bailout package, and approached Chief Minister Raman Singh to tide over the crisis. However, his response was "extremely cool."

The Chhattisgarh Sponge Iron Manufacturing Association has complained for the last few years about the lackadaisical attitude of the state government in resolving the crisis, which had forced its members to shut down many units.

Surana said that if the situation was not salvaged, it also would affect other industries, both in the state and other parts of central India.

The plant owners' body represents 175 small units with about 50,000 workers, and the mini-steel units use sponge iron, heavy-melting scrap and pig iron as raw material for producing ingots and billets.

The loss of thousands of jobs in the 175 mini-steel mills in Chhattisgarh is also likely to create tension in the steel industry, as the workers are unionized and those in India's state-owned steel plants are likely to express solidarity with them, as most of them are aligned with trade unions.

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