"Kalinganagar project is going on. It will start production from the fourth quarter of next fiscal," Tata Steel Managing Director T V Narendran told PTI.
The Odisha project is the second integrated unit of the home-grown steel major in India after Jamshedpur, where it recently completed borwnfield expansion to enhance capacity to 10 million tonnes per annum (mtpa).
The Kalinganagar project, which will essentially produce flat products, will have 3 mtpa capacity in the first phase. This would be doubled in the next phase.
Flat products are mainly used in automobile and consumer durable sectors, the demand for which has not increased on the expected lines in the current fiscal due to subdued economic growth.
Narendran, however, is hopeful of steel demand picking up next fiscal by at least six% as the country's economy is projected to grow by 5-7%.
"Next year's GDP forecast is 5-7%. Typically, steel demand grows by 1.2 to 1.3% of the GDP growth. If the GDP growth is 5%, I am expecting demand should grow by 6%," he said..
Steel consumption grew by just 0.5% in the country during the first 10 months of the current fiscal due to subdued economic growth.
Narendran said the subdued steel consumption growth in the current fiscal is mainly due to poor demand for commercial vehicle and construction segments as they were "struggling".
While the construction sector accounts for 60% of India's steel consumption, automobiles' contribution is around 15%.
"If you look at it, most the growth in the GDP has come from the agriculture segment. That's why steel demand did not grew much," he said.
Indian economy grew by 4.8% during July-September quarter. It had hit a decade's low of 5% in 2012-13 due to poor performance in the farm, manufacturing and mining sectors.