The steel industry in India is used to having to secure iron ore, coal, and other raw materials, but now they have another key resource concern: water.
Major steel companies in India, JSW Steel ltd. and Tata Steel ltd., as well as Vedanta ltd, a metal producer, have all identified water scarcity as a potential business risk, reports Bloomberg.
As the country faces a looming water crisis which has already led one of its largest cities to run out of water, competition for this precious resource will inevitably increase, leading to higher cost and risks for companies.
Water scarcity in the country is compounded with lack of efficiency. Dmandepp Singh, who heads non-profit CDP’s India office, said ‘the problem is that when companies in India get water, they get it cheap. There’s no incentive to manage a resource when it is available so cheap’. He warned that companies take for granted water availability.
In fact, water shortage may progress to become a significant risk for the third largest economy in Asia. A 2018 study by India’s environment ministry on the Economics of desertification, land degradation and drought estimated that those three threats combined had cost the country approximately 2.54% of its GDP in the year 2014-2015. Moreover, a 2018 CDP analysis revealed worldwide water-related financial losses worth $11.8 billion over the last five years for companies across the metals and mining sector. According to the CDP, ‘For companies in the metals and mining sector, no water means no business. Access to water and the ability to store and discharge it, are critical factors in all mining developments and operations, making this sector one of the most water intensive’.
Indian companies are turning to a variety of measures to prepare for and manage water risks, as per their most recent annual reports. Vedanta has undertaken a water risk assessment at its various locations and found a significant risk of shortages in Rajasthan, Punjab and Tamil Nadu due to competition for water use. The steel mill JSW Steel decided to build a new reservoir at its plant in the state of Karnataka to ensure the water supply to carry on with its business. Meanwhile, Tata Steel has chosen to invest in waste water treatment to reuse water, as well as rain water harvesting systems.