‘Indian companies must be competitive vis-à-vis China’4 min read . Updated: 21 Oct 2007, 11:18 PM IST
‘Indian companies must be competitive vis--vis China’
‘Indian companies must be competitive vis--vis China’
As a top bureaucrat in the steel industry, secretary Raghaw Sharan Pandey is responsible for charting a course to meet India’s production target of 200 million tonnes (mt) by 2019-2020. Pandey, who in the past, has been involved with national programmes in agriculture and education, will head what is known as the inter-ministerial group (IMG) to examine raw material security and infrastructure bottlenecks to boost steel investment.
Pandey spoke to Mint about the challenges facing the industry. Edited excerpts:
What are the main priorities of the IMG to speed up steel investments in the country?
One of the major concerns of steel companies is accessing land to build steel mills...
The cabinet has recently approved the Rehabilitation and Resettlement Policy, which should serve as a guide. While land has to be acquired by the state government, investors will have to take care of the people’s interest. A few companies, such as JSW Steel Ltd, are directly negotiating with landowners, offering stakes in innovative ways. The investor and the landowners have to come together, their problems have to be addressed and the state governments have to facilitate the process.
More than 700mt of iron ore is shipped around the world to make steel. Why is it important for domestic steel companies to secure iron ore mines?
For an industry to be competitive, it must get quality products at the least possible cost. Quite a few inputs go into making steel—most critical are coking coal and iron ore. India imports coking coal but has adequate reserves of quality iron ore. China has coking coal to meet its requirements for the next 80 years or so but imports quality iron ore. At current international long-term costs, coking coal and iron ore have more or less equal weightage in cost of steel production. If there’s a situation in which India has to import both, Indian companies will be at a distinct disadvantage. Indian companies must be competitive vis-à-vis China. If a country has inherent advantages, it must utilize it.
What about countries such as Japan which have neither of the two raw materials?
They are highly efficient in terms of energy consumption, have better manpower productivity and have cheaper infrastructure to carry raw materials and finished steel. Our industry still has a long way to go to catch up with Japan. Our comparison, in fact, has to be with China, the world’s largest steel producer, and we are shortly going to be the second largest producer.
Industry associations have been complaining that integrated steel producers are selling their products at rates higher than international prices by adding freight cost to the final price.
Producers generally base it on “import policy" price. The government has set up a price monitoring committee where producers and consumers discuss issues relating to prices. The steel producers resent when input prices such as of iron ore and coking coal go up. The consumers resent when prices of motorcycles and cars go up. But we can’t go into a regulatory regime.
But aren’t some of the steel producers at an advantage regarding their cost of production?
Yes. Different steel companies have different costs of production due to several factors. Some of them are more efficient. Some have iron ore and coal linkages which others don’t have due to historical reasons. All these affect the production cost. But we can’t introduce dual pricing as this will lead to black marketing.
Indian steel producers have been saying the country faces iron ore shortage. Do you agree?
No. We have huge reserves that can be converted into steel. We can sustain an industry of 200 million tonnes per annum (mtpa).
About 20% of our minerals lie under forests. Strict environment, forest and wildlife laws prevent its extraction. How can we balance development and environment preservation?
Experience has shown that provisions in environment laws concerning its preservation and judicial pronouncements based on these laws are coming in the way of exploiting our mineral wealth. The case of Kudremukh Iron Ore Co. Ltd is a case in point. While concern for ecology is important, we should facilitate a balanced approach whereby development goes hand in hand with environment and wildlife preservation.
The ministry has proposed setting up special mining zones in national parks and reserved forests. Has there been any progress?
We have initiated consultations with ministries concerned in order to balance the needs of preserving the environment, wildlife and forest, and development based on mineral wealth. This might lead to a new legal regime.
What is the government plan to introduce cleaner iron-making and steel technology?
India has higher power consumption and contributes to pollution more than many other countries. We are part of a six-country group, which includes China and Japan, to learn from each other on cleaner technology. Pollution control boards have to ensure compliance of prescribed norms by steel companies. We are also working with the United Nations Development Programme for pollution control and have seen significant progress in the last six months. The challenge is to replicate the success in the entire industry, particularly in the secondary sector.
There are concerns that India may not be able to produce the right mix of steel categories by 2011 to meet industry demands, leading to higher imports. Are you worried?
Not really. A study has been made by the International Iron and Steel Institute, which will serve as a guide. Eleventh Plan Working Group has also tried to make some projections on this. Individual companies also carry out market studies. And the gap is taken care of by international trade.
If steel projects get delayed, can we expect imports to rise?
Imports will rise if consumption grows more than production. In the short term, we may become a net importer. If we add capacity expeditiously and remain competitive, India will not only meet domestic demands but also remain exporter.