‘Demand will outstrip supply after lockdown’3 min read . Updated: 10 Apr 2020, 10:56 PM IST
- ‘If the govt feels Mumbai has too many infections, shut it down, but keep Aurangabad, Ahmednagar or Nashik running’
- 'The industry can benefit from a higher export incentive that will make us more competitive in the global markets'
Even as it has found itself fairly insulated from the economic consequences of the nationwide lockdown, private sector steelmaker Jindal Steel and Power (JSPL) believes the lockdown should be lifted in phases to allow the economy to find its feet again. In an interview, V.R. Sharma, managing director, JSPL, said if the lockdown continues, India will eventually see an explosion of demand for products that the industry will not be able to meet. Edited excerpts from the interview:
Has JSPL been affected by the lockdown?
Fortunately, we are situated in areas that are least affected by covid-19. Both Odisha and Chhattisgarh (where the bulk of JSPL’s operations are) have few reported cases and even those are in the districts where we do not operate. So, the state governments have allowed us to continue work through the lockdown, especially in maintaining continuous processes, like the blast furnace and coke ovens, so that production of liquid steel is not compromised. Our mills in Raigarh and Angul are also operational.
We had some export orders and we decided this is the right time to focus on them. (Because of the lockdown) the railways and ports are not overburdened. We had started booking export orders from February scheduled to be shipped in March and April. Customers still want us to complete the orders because they can stock the product till the pandemic passes. In fact, we are booking more orders because customers can see that we are not invoking force majeure, when so many companies in the world are invoking it. Therefore, their confidence in us has increased.
Will recession set in following the national lockdown?
I see this as a twin problem of recession amid an explosion of demand. Right now, in India, consumption is very low when people are buying only groceries and essentials. There’s no sale of vehicles, flats or consumer durables. When we open (the economy) fully, there will be a shortage of supply and an explosion of demand. Today, trucks are parked empty and, tomorrow, when trucks start moving, they won’t be able to meet the demand in time. We think we will face a recession because that is our state of mind today. After a month, the 130 crore people will start consuming again, and supply will not be able to match demand.
Will you avail of the loan repayment moratorium proposed by the Reserve Bank of India? Are the cuts in interest rates being transmitted?
We will use the moratorium because there is no money coming into the business; there is no domestic demand. Ultimately, big companies will make their payments. MSMEs will be hit the hardest—for them, cutting interest rates doesn’t make a difference if the business is not running. An interest rate cut is a temporary relief. Even interest rate cuts take time to pass on. RBI decisions don’t always reach the bank branch. Liquidity is still very tight in the system.
What does the steel industry expect the government to do at this point?
The industry can benefit from a higher export incentive that will make us more competitive in the global markets. We are asking for these incentives to be made 10% of exports. This will encourage exports and also bring in foreign exchange. This can be structured as a cash incentive or as pass-through schemes.
How and when do you see the lockdown being lifted?
The government should take care of people and provide medical aid. But I sincerely urge the government that wherever there is no problem, they should allow businesses to open. If you feel Mumbai has too many infections, shut down Mumbai, but keep Aurangabad or Nashik or Ahmednagar running. We have more than 700 districts in the country. In my view, at least 400 districts have few to no infections, and should be allowed to function. The daily wage workers will lose the most, as will small MSMEs. They cannot keep paying workers for three months when there is no money coming into the business. I feel MSMEs should be allowed to operate again, at least in areas where there are not as many infections. Transport (of goods) should be allowed, but the movement of people should be restricted. My suggestion is that the government should find a balance.