As it embarks on an expansion, steel maker Rashtriya Ispat Nigam Ltd is looking at opportunities beyond steel.
The government-run company intends to ramp production up from 3.6 million tonnes (mt) to 16 million tonnes by 2018. The Rs9,126 crore Visakhapatnam-based RINL plans to achieve this by increasing productivity with new technology and reducing energy costs by adopting a mixed-use approach with natural gas as a feedstock by 2010. The company, located on a 22,000-acre plot of land, has also started growing commercial trees such as Jatropha and pongammia, seeds of which yield biodiesel. About 2,495 hectares will be covered under a five-year programme at a cost of Rs 5-6 crore. Some 5,000 mango and 2,000 coconut, eucalyptus and cashew trees have already been planted this year. The plants are projected to generate a revenue of Rs20-25 crore by 2012.
Pradip Kumar Bishnoi, the 56-year-old chairman and managing director, spoke to Mint about how the company is blending its steel-making and plantation interests.
Why is RINL importing iron ore from Brazil when there is abundant supply in India? Is it expecting shortage in future as the company expands production?
We are ordering a shipload from Brazil to experiment in blending ores from both the countries and see whether it will increase productivity. Indian iron ore has high alumina content, which is not good for making iron, whereas, those found in Australia and Brazil have lower percentages of alumina. At present, we have a long-term contract with the National Minerals Development Corp., which meet our current requirement of 6.8 million tonnes.
Will the experiment end in concrete results?
When I was in Balmer Lawrie in the ’80s, we attempted to reduce cost of tea by blending cheaper tea from Sri Lanka and Bangladesh. It had become an issue then and many years later, everyone was endorsing it. It’s good to have an open mind.
How is the company going to tackle power needs as it expands capacity?
We are looking at taking advantage of natural gas, which is though in short supply now. Natural gas will improve efficiency by 10% and we want to start using it from 2009-2010 if the price is right. We will roughly need 2 million scm (standard cubic metre) a day. About 80scm is required to produce a ton of hot metal. We will use a mix of both gas and coal to meet our energy requirements.
What is your production target?
At present 33% of our production is specialty steel although it is designed to make mild steel. We plan to take it to 100% in 2010 years to meet needs of the automotive sector. Our planned seamless tube plant will cater to the growing oil and gas industry.
Why is the company planting so many trees?
We want to create wealth and revenue by planting bio-diesel plants such as Jatropha. Other varieties such as coconut and mango are also being planted.
One would love to take all the trees into book of accounts as assets. At present, there’s no accounting standard for agro forestry.
RINL has entered into partnership with public sector companies to buy coal mines overseas. Does it also plan to secure on its own?
For our special purpose vehicle company, we suggested three models for acquiring coal assets in South Africa, Australia, Canada, Zimbabwe and Mozambique: We buy equity share in a company or take the innovative approach of prospecting a mine with a developer short of money.
Or we could ask for a mining lease. But this plan will meet only 10% of our requirement, not 100%, so we will be looking at opportunities on our own.
Is RINL considering an initial public offering?
Nothing has been decided. The government owns 100% equity of the company so the government has to decide about diluting its shares.
Earlier, there have been talks about dilution from 100% to 75%, or in some cases, up to 51%. We fall in the first category. Our trade union is not keen on dilution.