These plants with capacity from 10,000 tons to 5 lakh tones per year operate through electric furnaces and generally use ferrous scrap, pig iron or sponge iron as raw materials. These plants are easier to be constructed and their gestation period is short. Their capital cost ranges between Rs. 1,500 to Rs. 2,500 per ton of steel as against Rs. 5,000 per ton in the integrated steel plant.

There are more than 200 such mini steel plants with installed capac­ity of 12 million tons of crude steel per annum (about one-third of the total installed capacity of the country. Their total annual production is about 2.5 million tones of mild steel grades in 1997-98 (spe­cial and alloy steel about 2.15 million tons).

These mini steel plants are distributed in different parts of the country particularly in areas away from the integrated steel plants. The Vyasankere plant of Sandur Manganese and Iron Ore Ltd. (Karnataka), the Mukund Iron and Steel Company (Mumbai), the National Iron and Steel Company and Guest Keen Williams (Haora), the Andhra Steel Corporation (Vishakhapatnam), the Goa Dempo Pvt Ltd and the Salegaonkar Pvt. Ltd. (Goa) are some important mini steel plants.

The growth of these mini steel plants was promoted by increasing demands for steel, lower cost of production, controlled price of the steel, easy availability of scrap at lower prices from home and abroad, lower competition from the ISPs, lower capital investment and shorter gestation period.

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Al­though there still exists wide gap between the pro­duction and demands of the steel (expected demand by 1999-2000 about 31 million tons; estimated production 15.8 million tons), but the decontrol of the steel sector, import liberalisation, increasing cost of power, higher prices of scrap, poor quality of products and lower induction of new technology have threatened the survival of these plants.

To tide over the difficulty the government is encouraging the use of sponge iron and scrap from ship breaking as substitutes which are available in huge quantity. The need is to install bigger furnaces with ultra high power transformers and facilities for continuous charging of DRI (direct reduced iron).