The first public sector sponge iron unit, the Sponge Iron India Limited (SIIL) was set up at Palvancha, near Kothagudem in Andhra Pradesh using coal from Singareni coalfield in 1981. It took over a decade to popularise sponge iron as a substi­tute to metallic scrap in mini steel plants with elec­tric arc furnaces.

In due course a number of sponge iron units came into being the important among these include the Bihar Sponge Iron Limited, Essar Gujarat Ltd., Hazira and Grasim Ltd., Raigad (Maharashtra). The last two are gas based units. The industry is facing a set back with the reduction of import duty on scraps.