Anil Agarwal, chairman of Vedanta Resources Limited, in a frank dialogue with Mint’s Associate Editor Shrija Agrawal, opens up on wide range of topics - from impact of US-China trade war on India and future of Indian economy to efficacy of insolvency process (IBC). Speaking on current economic slowdown and India’s $ 5 trillion ambitions, Mr. Agarwal is quite optimistic that economy will rebound, and he is confident of Prime Minister Narendra Modi to deliver. He also reveals his dream to be able to produce 50% of our oil demand in India, and firmly believes that even though India will and should adopt cleaner technologies, oil will continue to play a dominant role in our economy and industrial growth. Edited excerpts :
China, in the past has been able to monopolize the price and supply curve. Amidst global trade war between US and China, how do you think companies, outside US and China, will be impacted; how will the commodity price and supply be impacted?
We (India) do not want to be a dumping ground for the Chinese. And between them, we should look for opportunities that could benefit India. We are close to 140 crores (population), and no one can afford to ignore us; we are one of the largest market.
What do you feel is the long-term implication of this trade war?
Goods, that are not going to America, is being diverted to India. As a result, we see Indian ports flooded with scrap – electronics and other goods. However, Modi Government is quite strong in decision making, and they will take corrective measures to ensure this doesn’t impact us.
Scenario is gloom right now, and there are a lot of sound-bytes coming on ‘economic slowdown.’ What are your views about the macro-economic environment?
India is going through a change. The way, we used to do business before must change. However, I agree that now there is economic slowdown but I am very optimistic. The way Prime Minister Narendra Modi was able to transform Gujarat, I am sure he will do the same for India. Fundamentally, we want more industries, more reforms, ease of doing business and eradication of corruption: these things are in their Government mind. We have to have some patience, and results will come. In the meantime, the kind of companies that have gone down, it breaks my heart.
What are the major reforms that you expect Government to do – in terms of a mega bailout – to tide over the slowdown, we are seeing right now?
World has been developed based on leverage. And as long as promoters have not siphoned money and has used the money to build business, Government and banks should support them. I have seen China and other countries, and I do not believe that any entrepreneur/ industrialist is capable to build business on their own (without Government and Bank’s support).
We have seen a major reform in the country in form of Insolvency and Bankruptcy Code (IBC), you also acquired one of the large 12 accounts, Electrosteel, and people think that you will create another ‘Bokaro’ out of it. How do you look at the IBC phenomena?
IBC process, that has been brought in, is good but I believe it needs to be relooked to ensure that things happen on time. It is taking very long (to complete). Competent people must come and contribute to make sure that the process is completed on time. And this (reducing delays) is very important because banks, promoters and bidders – everyone – are suffering. IBC, as a system very good, but it needs to be relooked to ensure it is crisp and delivers result.
Tell us about the Electrosteel acquisition? How has benefits of synergy accrued to you?
Electrosteel is a very small acquisition for us. We are already in iron-ore business and the Government was expecting for us to do value-added investments. We got this opportunity, and acquired Electrosteel.
Mr. Raghubar Das, Chief Minister of Jharkhand, often tells me that he wants to leave behind a legacy, and can we (Vedanta) create another ‘Bokaro.’ I come from Bihar, and I understand him, reflect his views and appreciate his enthusiasm. And at the moment we are working on doubling the capacity of Electrosteel, and at the same time exploring how to create a world class company out of it. There is nothing on the cards, immediately, but in times to come, we will look at how we can create another ‘Bokaro’ out of Electrosteel.
Are there any other acquisitions on the cards right now through the IBC process for you?
No, at the moment our hands are full. I will like to share with you - IFC has done an independent report that shows we (Vedanta) contribute to 1% GDP of the country. And the Tax Transparency Report shows that over Rs. 2 lac crores of tax has been paid by Vedanta in the last 5-6 years. I feel very proud of this. We have always said, “Please do not under-estimate India." No other country in the world has the kind of human-resource, natural-resource, climate-resource and location (ports on 3 sides) as we do.
We have nothing on cards to acquire, but we have big plans. We will invest Rs. 60,000 crores in the country. I am very passionate to produce oil in the country, which everybody said was not possible, but we did. We will invest Rs. 25,000 crores in oil & gas, Rs. 15,000 crores in silver and zinc, Rs. 15,000 crores in aluminium.
Interesting, you mentioned about investing Rs. 60,000 crores in India. Government has a vision to become $ 5 trillion economy by 2030. If you were to reflect on 3 or 4 key steps/ measures on how we could achieve that, what will those be?
I was in Delhi, and I told them (Government) that public sector is still the backbone of India. I come from Bihar, and we grew up in public sector environment – be it Sindhri, Bokaro and Baurani. I think, we must move on; today, Government should have no business to be in business. I am not saying it has to be privatised but it has be made independent (autonomous or corporatized). At present 70-80% of our economy is from public sector. And if the public sector is made independent, based on my experience in Hindustan Zinc and Balco, production will increase by at least 3 times. And that itself will help the GDP growth. I urge the unions in public sector enterprises, be in Coal India or ONGC, even though they are doing well, to continue ramping up production. This is one way that will help creating a $5 trillion economy.
We have done enough above the ground – we have done a good job in agriculture – but below the ground (mining) not so well. Why do we need to import? We have $400-450 billion of import - such as in copper, oil and gold - and if we could produce these in India, it can create millions of jobs. Forest and environment clearances are the biggest challenge for us. We maintain our environment in the best possible way, the world is watching us, but beyond that Government should not be ‘revenue mined.’ Government’s nature is to be ‘revenue minded,’ and that’s the reason we do not get enough revenue, rather it should be ‘production minded.’
There is an old tale – Goddess Lakshmi had to put a garland around someone and choose him as her husband. And everyone was excited and wanted Lakshmi to garland them. Afterall, she is Lakshmi (Goddess of Wealth). But she choose Vishnu, who was carefree and sitting far away in Sheersagar. Moral is that Lakshmi (Wealth) chooses the one, who doesn’t care.
You have this major desire to produce 50% of oil or hydro-carbon in India. Are we seeing the end of hydro-carbon super-cycle? We are seeing large corporates diversifying from this space.
I do agree that issues such as climate change and global warming are very important for us, clean technologies such as electric cars will come. In fact, we should be well ahead of these issues, but oil is not going away. Oil continue to be used in ships, heavy vehicles and machines. In India, we continue to import 85% of our oil requirements. And most of our revenues goes towards oil and gold imports; both of which, I believe we have abundant.
Taking about the Reliance transaction, as Reliance and Aramco are exploring a possible deal in Reliance’s refinery business. There are speculations raised that Reliance is exiting its core business. Being a seasoned entrepreneur, what is your sense about this deal?
I am unaware of the specifics of the deal, so I can talk from a general viewpoint. I respect Reliance in terms of what they have been able to achieve. I am sure Reliance has capability to pull British Petroleum and Saudi Aramco (as partners), so hats off to them.
This entire decision to de-list from LSE, was this a painful decision. What was in your mind? And do you believe that corporates are at times unfairly targeted?
I have raised $ 32 billion in the last 15 years, and every investor, who has put in money in Vedanta, has benefited. We have never defaulted on any of our liabilities. It was just time to move on.
So how do you think can job creation be increased? Do you believe ‘Make in India’ was a right step in the right direction, even though it hasn’t translated into a lot of jobs?
In order to create more jobs, we need production to increase, more startups and innovation and more mining opportunities. I have no doubt that in time, may be 1-1 ½ years, things will improve.
What are the 2-3 specific challenges you faced while building up Vedanta?
Sure, we will like Government to open-up more but most importantly, Government to start trusting businessmen. Whenever, in past, Government has trusted the private sector, we have delivered: be it airport, airline, steel plants and telecom.
As far as Vedanta is concerned, our Tuticorin plant has been closed. The last 20 years, we have been serving the country by producing copper in India, and now that is being imported. We have invested in aluminum plant in India, but half the aluminum is being imported because of variety of reasons: trade relationships and price wars. We are working with the Government on these issues and all we want is quick decisions.
You mentioned previously that in 10 years, Vedanta can be the next ‘Exxon.’ Where are you in that journey?
We always look up the people who are on top. Cairn has all the capabilities to achieve this (dream).We have oil basins in Barmer, Assam, and we can achieve a lot. I always believe that oil is not in the ground, it’s in our minds. And in my mind, there is huge determination that we have oil and we will produce it in India. If you look at countries such as Saudi Arabia or Kuwait, they all started small and were able to ramp up. We too have similar ambitions.