BIG BOSS | secretary, steel pradeep kumar misra
‘WE WERE FIRST TO REBOUND IN THE WORLD AFTER THE RECESSION’
AN IAS officer of the Uttar Pradesh cadre and 1976 batch, Pradeep Kumar Misra postgraduated in economics. He has worked in various capacities for the Government of India and the UP government for 34 years. He has wide-ranging experience of the strategic policy framework and its implementation in governing various sectors, including infrastructure, finance, industry and defence. As Secretary, Steel, to the Government of India, he is actively pursuing and monitoring capacity expansion plans of the steel sector and is also involved in policy issues pertaining to key raw materials such as iron ore and coking coal.
interviewed by TR RAMACHANDRAN & ANIL TYAGI
gfiles: What are the global benchmarks being followed in the steel sector in India?
Pradeep Kumar Misra: Some of the steel plants are near the global benchmarks. But there are no fixed global benchmarks, there is a range of global benchmarks. For blast furnace productivity, the World Steel Association gives a range of about 2.5-3.5 tonnes per cubic metre per day. We have prescribed a similar range as a benchmark that steel plants should strive for. Currently, they may be much below this.
gfiles: Benchmarks are all very well but is the input cost the same?
PKM: The input cost is not exactly the same and inputs are also not exactly the same. For instance, the phosphorus content in the iron ore and the ash content in Indian coking coal are higher. These are the gangue material, they disturb the process of the blast furnace. So the efficiency goes down and therefore output also decreases because they occupy a critical space and position in a chemical reaction process. So both these factors will inhibit achieving the highest standard. The higher the purity of the raw materials, the greater the possibility of achieving the world benchmarks.
Many of the more advanced steel-makers in the world try to purify the raw material or buy raw material of that purity. Obviously, that means higher cost because they are going for very high quality and they don’t want any impurities and also they are technologically advanced.
They are able to sell that steel at high price because of its high quality and higher formation, in the sense that it is CRGO or Cold Rolled Grain Oriented. CRGO is used for transformers. The process of making CRGO is far more complicated, technologically requires much higher controls.
Therefore the price of this steel is also very high. The market price is controlled by the steelmakers because very few people can make this kind of high quality steel with high skilled technology. The Japanese steelmakers achieve the highest efficiency because they not only use the best quality raw materials but they are able to do this and still sell steel because they are making high-grade steel.
Ordinary pig iron will cost Rs 20,000 per tonne but this kind of CRGO will probably be five times more or Rs 1 lakh per tonne. The amount of money which has gone into the raw material is obviously 20% higher in the case of high quality steelmaking but the return you get is five times higher. In the process, blast furnace productivity increases because of high quality raw material. If the quality of the raw material is not so high, the chemical and physical processes involved in the blast furnaces get inhibited with more gangue material in the process so the productivity will be lower.
Compared to international standards, we are not up to the mark. We must try for that. This requires changes in the technology, blast furnace design, in the feedstock raw materials. I want the steel industry to move in that direction but this can’t happen overnight. You have to make changes and investment in technology, material, manpower training and so on.
gfiles:Do you see the journey of the steel industry in the past 50 years as satisfactory?
gfiles:Has the steel industry recovered fully from the global meltdown that sent commodities’ prices tumbling?
PKM: Yes, we’ve come out of the meltdown from April 2009 onwards. We were among the first to rebound in the world in terms of demand and production.
gfiles:So the targets for steel production did not stagnate even during the meltdown?
PKM: There was a temporary setback for one year, 2008. The capacity kept going up. The meltdown did not affect us much. It was a very minor meltdown in 2008-09 where the demand growth was almost stagnant but it bounced back in 2009-10. As the steel industry grows, it becomes more robust and it’s a natural tendency to go into higher value added products because the demand scenario also keeps changing. As the demand for higher value-added products in a more sophisticated economy picks up, it becomes viable to put up production facilities to yield the minimum demand. The Ministry for Steel encourages it. We need to have specialized steel production facilities and technology so that we don’t have to import. We should be able to produce all kinds of steel in this country and become a net exporter.
gfiles:Do you have a target for this?
PKM: By 2015-16, we should be able to become a net exporter but we don’t export high-value products.
gfiles:How do we compare with China? In 2009, 47% of world steel production was from China.
PKM: China produces almost 600 million tonnes of steel. But there are signs that they are going to stagnate now whereas we are on the upsurge. China’s rate of growth accelerated earlier than ours and is still higher. The steel demand in 2020 should be 200 million tonnes, in 2030 it should be about 350 million tonnes. The Chinese have a different model, they have laid stress on heavy steel structure and heavy use of steel in their infrastructure projects. Steel is one of the indicators of economic growth but it’s not the only indicator. The product mix of an economy can be different. India is primarily a service sector economy. Even our exports are service-sector exports. China’s economy is more into manufacturing. So the product mix also influences the amount of steel consumed. If you are primarily a manufacturing-based economy then consumption will be much higher. Our product mix is different. That does not mean we are not growing as rapidly, steel does not determine the entire economics of the nation though it is an important determinant. There are other determinants like the mode of products that you have, the kind of infrastructure development that you are doing. For instance, you can use a lot of steel for making bridges or have bridges constructed with cement.
gfiles:The past few years have seen an unprecedented scramble among businessmen to secure approval for iron ore mining and for setting up steel plants of all types and all dimensions. How many of the projects, especially the integrated steel projects, will ultimately be set up? Will there be over-capacity, say, five to 10 years hence?
PKM: A certain amount of overcapacity in any case is necessary so that you have the flexibility to produce a higher level if required. Ideally, in any system, capacity utilization should be around 80%. Therefore, you should have 30% excess capacity by design. If there is any overcapacity, then we export the steel.
gfiles: Is SAIL’s Rs 59,905-crore investment plan envisaging saleable steel production of 23.13 million tonnes per annum by 2012 on schedule? What is next on the blueprint?
PKM: SAIL plans to increase its saleable steel production capacity from the current 12 million tonnes to 23.13 million tonnes by 2012-13. They are investing Rs 70,000 crore (internally generated) in the plant machinery and captive mining. Expansion-cum-modernization of the system and better management lead to less wastage and losses in the process of production. The current expansion is based on the latest technology which will bring better efficiency.
gfiles:Steel is facing intense competition from aluminium and plastics in its two main markets – construction and automobiles. There is also competition from the asbestos sheets and pipes industries, and other industries. Has the Indian steel industry adopted any unified approach to protect or, rather, expand its turf?
PKM: There is always competition from any product. But there are certain applications where nothing but steel can be used because real strength is required. Therefore, this competition is marginal. There will be some substitution from time to time but there is no real competition.
gfiles:The steel industry has been trying to reduce staff through its lean manufacturing strategy. What is the productivity per person, compared to the most efficient steel producer in the world?
gfiles: To produce one tonne of steel, a company has to move four tonnes of raw materials. Raw material sourcing and logistics prima facie offers tremendous scope for cost saving. Do you plan to outsource logistics operations or streamline them to save on inventories, freight, etc.? Of the total iron ore, coking coal, steam coal, limestone and other raw materials, how much do you produce inhouse and how much do you procure from the market? Have you revisited your procurement strategy?
PKM: We have sufficient iron ore. Last year, we exported 117 million tonnes of iron ore. Thirty million tonnes of coking coal are required in India; 75% is imported and 25% is our own. Our coking coal is not high-grade, there is a lot of ash content. So we have to mix it with imported coal to get the right chemical composition.
gfiles: How is it that ICVL has not yet struck a single deal since its formation in 2007, whereas private companies have acquired several mines in Australia, Indonesia and African countries?
gfiles: What is the status of the Indian Steel Alliance (ISA), an association of five integrated steel producers?
PKM: It has been wound up. I have not heard of this organization for quite some time.
gfiles: Keeping in mind the periodic tension between producers and consumers, and overpricing and marketing of domestic steel, should there be an independent regulator to oversee growth and regulation of the entire sector right from ore mining to the tariff structure for steel?
PKM: I’m not in favour of any kind of regulation. Steel was deregulated in 1991. The growth in the steel sector has been very significant thereafter. The regulated regime does not necessarily lead to best results. Second, steel was taken out of the purview of the Essential Commodities Act. Third, import duty has been reduced very substantially on steel products. So it is facing international competition, showing prices are competitive in India. So it doesn’t need a regulator.
gfiles: SAIL has signed a slew of joint venture agreements or alliances with various entities, the notable one being the shipping JV with Shipping Corporation, the coal mining JV with Tata Steel and the strategic alliance with South Korea’s POSCO. How many of the JVs have actually taken off? Do you have more JVs on the anvil?
PKM: SAIL has signed a few MoUs with international companies like POSCO. Some JVs are doing well, those in the power, cement and e-commerce sectors. Right now, the steel we make is based on coking coal and coking coal has become very expensive. So it is time we shift to alternative technology based on thermal coal because we have enough thermal coal. There are adequate thermal coal reserves worldwide whereas coking coal reserves are depleting. The day is not far when getting coking coal will become very difficult, maybe 20 years from now. So if we can bring new technology... SAIL and other private sector companies are in the process of forging alliances with non coking coal based foreign manufacturers of steel like Kobe Steel of Japan and POSCO of South Korea. Recently, JVs were signed with RITES for manufacturing wagons for Indian Railways. Another JV has been signed by RINL with Railways to manufacture axles for them.
gfiles: How has the steel industry grown in this fiscal and what is the projected production figure in the next five years?
PKM: The next five-year plan will be known only in one year’s time. The Planning Commission has been involved in this planning. We are making a five-year plan which is called a strategic plan for the purpose of a Results Framework Document (RFD). We have worked as per RFD and we have secured 106 points by the government. Some initiatives have been taken to strive towards the international benchmarks for production efficiencies and emission norms, such as lower power and coke consumption rate per tonne of steel, lower use of iron ore per tonne of steel and introduction of PCI & CDI.
—WITH INPUTS BY NARESH MINOCHA
‘WE WERE FIRST TO REBOUND IN THE WORLD AFTER THE RECESSION’
AN IAS officer of the Uttar Pradesh cadre and 1976 batch, Pradeep Kumar Misra postgraduated in economics. He has worked in various capacities for the Government of India and the UP government for 34 years. He has wide-ranging experience of the strategic policy framework and its implementation in governing various sectors, including infrastructure, finance, industry and defence. As Secretary, Steel, to the Government of India, he is actively pursuing and monitoring capacity expansion plans of the steel sector and is also involved in policy issues pertaining to key raw materials such as iron ore and coking coal.
interviewed by TR RAMACHANDRAN & ANIL TYAGI
gfiles: What are the global benchmarks being followed in the steel sector in India?
Pradeep Kumar Misra: Some of the steel plants are near the global benchmarks. But there are no fixed global benchmarks, there is a range of global benchmarks. For blast furnace productivity, the World Steel Association gives a range of about 2.5-3.5 tonnes per cubic metre per day. We have prescribed a similar range as a benchmark that steel plants should strive for. Currently, they may be much below this.
gfiles: Benchmarks are all very well but is the input cost the same?
PKM: The input cost is not exactly the same and inputs are also not exactly the same. For instance, the phosphorus content in the iron ore and the ash content in Indian coking coal are higher. These are the gangue material, they disturb the process of the blast furnace. So the efficiency goes down and therefore output also decreases because they occupy a critical space and position in a chemical reaction process. So both these factors will inhibit achieving the highest standard. The higher the purity of the raw materials, the greater the possibility of achieving the world benchmarks.
Many of the more advanced steel-makers in the world try to purify the raw material or buy raw material of that purity. Obviously, that means higher cost because they are going for very high quality and they don’t want any impurities and also they are technologically advanced.
They are able to sell that steel at high price because of its high quality and higher formation, in the sense that it is CRGO or Cold Rolled Grain Oriented. CRGO is used for transformers. The process of making CRGO is far more complicated, technologically requires much higher controls.
‘Compared to international standards, we are not up to the mark. This requires changes in the technology.’
Therefore the price of this steel is also very high. The market price is controlled by the steelmakers because very few people can make this kind of high quality steel with high skilled technology. The Japanese steelmakers achieve the highest efficiency because they not only use the best quality raw materials but they are able to do this and still sell steel because they are making high-grade steel.
Ordinary pig iron will cost Rs 20,000 per tonne but this kind of CRGO will probably be five times more or Rs 1 lakh per tonne. The amount of money which has gone into the raw material is obviously 20% higher in the case of high quality steelmaking but the return you get is five times higher. In the process, blast furnace productivity increases because of high quality raw material. If the quality of the raw material is not so high, the chemical and physical processes involved in the blast furnaces get inhibited with more gangue material in the process so the productivity will be lower.
Compared to international standards, we are not up to the mark. We must try for that. This requires changes in the technology, blast furnace design, in the feedstock raw materials. I want the steel industry to move in that direction but this can’t happen overnight. You have to make changes and investment in technology, material, manpower training and so on.
gfiles:Do you see the journey of the steel industry in the past 50 years as satisfactory?
PKM: There has been very rapid expansion in steel demand in the past five years. The average rate of growth has been 9.2% for the past five years. This is due to the policies of the government. There is a direct relationship between rate of growth of GDP and steel demand. A 1% increase in GDP will lead to 1-1.2% increase in steel consumption. There has been a rapid growth of steel capacities.
They can’t come up overnight, it takes three years to put up a plant. There will be a time lag. Steel is a decontrolled sector, so anybody can put up a steel plant. The market is responding, demand is increasing very rapidly. Still, by and large, we are a marginal net importer, 95% of our demand is met by domestic steel production.
Most quality steel is imported. You can’t put up a quality steel plant unless you have certain minimum basic capacity. The cost of putting up a plant is high and there are certain discreet numbers. You cannot put up a 2000-tonne plant making CRGO, it’s not viable. You can put up a 100,000-tonne plant only if there is enough demand in the country. So some of the special high-grade steel behind industries is coming through lots of tie-ups. For instance, Tata has a tie-up with a Japanese company, Nippon Steel;
JSW with JFE of Japan; SAIL has signed MoUs with Kube Steel of Japan and POSCO of Korea for setting up steel plants. This includes specialized steel lines so if you put up a 3,000,000-tonne plant and specialized steel facilities of 200,000 tonnes as part of that plan, you make raw material, refine it, put it through various processes. As the demand has come to a level where it is possible to set up a facility to produce specialized steel through international tie-ups to get the technology, we are going into higher grade steelmaking with the expansion of steel production overall. It’s a welcome trend and we encourage it. As it is a decontrolled sector, it is for the private sector and the public sector people to respond.
gfiles:Where do you stand today?
PKM: If we look at the past 50 years, we were producing about 40 million tonnes of steel in 1991 and last year we produced 64.88 million tonnes (2009-10). For the current year, it’s higher. Till November 2010, there is an increase of 7.3% over last year. We will be producing about 70 million tonnes of steel. Next year, we might be producing 80 million tonnes because of the rapid increase in demand. Ground field expansion is going on, many plants are coming up. Last year, the capacity that was added for steel production was about 8 million tonnes, in the current financial year we expect to add about 10 million tonnes.
They can’t come up overnight, it takes three years to put up a plant. There will be a time lag. Steel is a decontrolled sector, so anybody can put up a steel plant. The market is responding, demand is increasing very rapidly. Still, by and large, we are a marginal net importer, 95% of our demand is met by domestic steel production.
‘There is a direct relationship between rate of growth and steel demand. A 1% increase in GDP will lead to 1-1.2% increase in steel consumption.’
Most quality steel is imported. You can’t put up a quality steel plant unless you have certain minimum basic capacity. The cost of putting up a plant is high and there are certain discreet numbers. You cannot put up a 2000-tonne plant making CRGO, it’s not viable. You can put up a 100,000-tonne plant only if there is enough demand in the country. So some of the special high-grade steel behind industries is coming through lots of tie-ups. For instance, Tata has a tie-up with a Japanese company, Nippon Steel;
JSW with JFE of Japan; SAIL has signed MoUs with Kube Steel of Japan and POSCO of Korea for setting up steel plants. This includes specialized steel lines so if you put up a 3,000,000-tonne plant and specialized steel facilities of 200,000 tonnes as part of that plan, you make raw material, refine it, put it through various processes. As the demand has come to a level where it is possible to set up a facility to produce specialized steel through international tie-ups to get the technology, we are going into higher grade steelmaking with the expansion of steel production overall. It’s a welcome trend and we encourage it. As it is a decontrolled sector, it is for the private sector and the public sector people to respond.
gfiles:Where do you stand today?
PKM: If we look at the past 50 years, we were producing about 40 million tonnes of steel in 1991 and last year we produced 64.88 million tonnes (2009-10). For the current year, it’s higher. Till November 2010, there is an increase of 7.3% over last year. We will be producing about 70 million tonnes of steel. Next year, we might be producing 80 million tonnes because of the rapid increase in demand. Ground field expansion is going on, many plants are coming up. Last year, the capacity that was added for steel production was about 8 million tonnes, in the current financial year we expect to add about 10 million tonnes.
gfiles:Has the steel industry recovered fully from the global meltdown that sent commodities’ prices tumbling?
PKM: Yes, we’ve come out of the meltdown from April 2009 onwards. We were among the first to rebound in the world in terms of demand and production.
gfiles:So the targets for steel production did not stagnate even during the meltdown?
PKM: There was a temporary setback for one year, 2008. The capacity kept going up. The meltdown did not affect us much. It was a very minor meltdown in 2008-09 where the demand growth was almost stagnant but it bounced back in 2009-10. As the steel industry grows, it becomes more robust and it’s a natural tendency to go into higher value added products because the demand scenario also keeps changing. As the demand for higher value-added products in a more sophisticated economy picks up, it becomes viable to put up production facilities to yield the minimum demand. The Ministry for Steel encourages it. We need to have specialized steel production facilities and technology so that we don’t have to import. We should be able to produce all kinds of steel in this country and become a net exporter.
gfiles:Do you have a target for this?
PKM: By 2015-16, we should be able to become a net exporter but we don’t export high-value products.
gfiles:How do we compare with China? In 2009, 47% of world steel production was from China.
PKM: China produces almost 600 million tonnes of steel. But there are signs that they are going to stagnate now whereas we are on the upsurge. China’s rate of growth accelerated earlier than ours and is still higher. The steel demand in 2020 should be 200 million tonnes, in 2030 it should be about 350 million tonnes. The Chinese have a different model, they have laid stress on heavy steel structure and heavy use of steel in their infrastructure projects. Steel is one of the indicators of economic growth but it’s not the only indicator. The product mix of an economy can be different. India is primarily a service sector economy. Even our exports are service-sector exports. China’s economy is more into manufacturing. So the product mix also influences the amount of steel consumed. If you are primarily a manufacturing-based economy then consumption will be much higher. Our product mix is different. That does not mean we are not growing as rapidly, steel does not determine the entire economics of the nation though it is an important determinant. There are other determinants like the mode of products that you have, the kind of infrastructure development that you are doing. For instance, you can use a lot of steel for making bridges or have bridges constructed with cement.
gfiles:The past few years have seen an unprecedented scramble among businessmen to secure approval for iron ore mining and for setting up steel plants of all types and all dimensions. How many of the projects, especially the integrated steel projects, will ultimately be set up? Will there be over-capacity, say, five to 10 years hence?
PKM: A certain amount of overcapacity in any case is necessary so that you have the flexibility to produce a higher level if required. Ideally, in any system, capacity utilization should be around 80%. Therefore, you should have 30% excess capacity by design. If there is any overcapacity, then we export the steel.
We are well-placed with regard to iron ore resources. The issues that threaten us are lack of adequate coking coal because that is the other key raw material. We have limestone which is also used in making steel but some particular limestone is imported. Coking coal is an area where we need to outsource aggressively through the private and public sectors or PPP (Public-Private Partnership).
gfiles:But the quality continues to be very bad....
PKM: First, we don’t have high-grade coking coal in our country. We are buying it, mostly from Australia and the US. New coking coal areas are coming up in Mozambique, Indonesia... these are untapped areas. As the demand is increasing we are looking at these areas. Some of them have very high-grade coking coal which has not been exploited. So we need to go out aggressively to meet our current and future requirements.
‘Some of the special high-grade steel behind industries is coming through lots of tie-ups. Tata has a tie-up with a Japanese company, Nippon.’
gfiles:But the quality continues to be very bad....
PKM: First, we don’t have high-grade coking coal in our country. We are buying it, mostly from Australia and the US. New coking coal areas are coming up in Mozambique, Indonesia... these are untapped areas. As the demand is increasing we are looking at these areas. Some of them have very high-grade coking coal which has not been exploited. So we need to go out aggressively to meet our current and future requirements.
Environmental clearance is the other issue which needs to be sorted out for setting up new steel plants, especially green field projects. We have been urging the Ministry of Environment and Forests for speedy clearance otherwise these green field capacities can’t come up in the represented time-frame.
gfiles: What about captive mining for steel plants?
PKM: It is a good policy to have captive mining because of two reasons. One, security of resources which is essential for long-term investment. Two, a large company which invests a huge amount of money in putting up steel plants manages these mining assets better from both the point of view of optimum utilization of the ore and environmental issues like reforestation and so on. Small, private individuals disappear and they leave the mine open, don’t rehabilitate the mine. So there is more certainty of ensuring ecological and environmental rehabilitation for large steel plants.
gfiles: What about captive mining for steel plants?
PKM: It is a good policy to have captive mining because of two reasons. One, security of resources which is essential for long-term investment. Two, a large company which invests a huge amount of money in putting up steel plants manages these mining assets better from both the point of view of optimum utilization of the ore and environmental issues like reforestation and so on. Small, private individuals disappear and they leave the mine open, don’t rehabilitate the mine. So there is more certainty of ensuring ecological and environmental rehabilitation for large steel plants.
gfiles: Is SAIL’s Rs 59,905-crore investment plan envisaging saleable steel production of 23.13 million tonnes per annum by 2012 on schedule? What is next on the blueprint?
PKM: SAIL plans to increase its saleable steel production capacity from the current 12 million tonnes to 23.13 million tonnes by 2012-13. They are investing Rs 70,000 crore (internally generated) in the plant machinery and captive mining. Expansion-cum-modernization of the system and better management lead to less wastage and losses in the process of production. The current expansion is based on the latest technology which will bring better efficiency.
gfiles:Steel is facing intense competition from aluminium and plastics in its two main markets – construction and automobiles. There is also competition from the asbestos sheets and pipes industries, and other industries. Has the Indian steel industry adopted any unified approach to protect or, rather, expand its turf?
PKM: There is always competition from any product. But there are certain applications where nothing but steel can be used because real strength is required. Therefore, this competition is marginal. There will be some substitution from time to time but there is no real competition.
gfiles:The steel industry has been trying to reduce staff through its lean manufacturing strategy. What is the productivity per person, compared to the most efficient steel producer in the world?
PKM: Different plants have different productivity levels. The highest levels in the world are about 500-1,000 tonnes per man per year. It depends on the amount of outsourcing you do. Some of this is artificial, in the sense you can either employ the people yourself or outsource lots of jobs. Like JSW Steel has productivity of about 700-800 tcs/man/year. ESSAR Steel and Ispat have 1500-2,500 tcs/man/year. Most conventional steel plants like SAIL have 226 tcs/man/year because they do all the jobs in house, there is no outsourcing. JSW and ESSAR do a lot of outsourcing and that outsourcing is not counted as manpower.
This manpower is removed from the denominator so it’s somewhat complex and you can’t pinpoint actual manpower requirement if you include the outsourcing. It’s actually much more than what they are showing. We would certainly like to increase the productivity per manpower and we’ve asked them. In the process of expansion you should also reduce manpower but they’ll not do the kind of outsourcing the private-sector steel plants are doing because of two reasons: security and better long-term viability.
gfiles: Are you focusing on quality steel?
PKM: There are two aspects. One, the consumer should get quality steel, especially for construction activities like making transformers, TMT bars, beams. With the help of BIS we have evolved standards. Two, quality steel is not manufactured in India. So we are encouraging Indian companies to start manufacturing quality steel. Then we won’t have to import.
This manpower is removed from the denominator so it’s somewhat complex and you can’t pinpoint actual manpower requirement if you include the outsourcing. It’s actually much more than what they are showing. We would certainly like to increase the productivity per manpower and we’ve asked them. In the process of expansion you should also reduce manpower but they’ll not do the kind of outsourcing the private-sector steel plants are doing because of two reasons: security and better long-term viability.
gfiles: Are you focusing on quality steel?
PKM: There are two aspects. One, the consumer should get quality steel, especially for construction activities like making transformers, TMT bars, beams. With the help of BIS we have evolved standards. Two, quality steel is not manufactured in India. So we are encouraging Indian companies to start manufacturing quality steel. Then we won’t have to import.
gfiles: To produce one tonne of steel, a company has to move four tonnes of raw materials. Raw material sourcing and logistics prima facie offers tremendous scope for cost saving. Do you plan to outsource logistics operations or streamline them to save on inventories, freight, etc.? Of the total iron ore, coking coal, steam coal, limestone and other raw materials, how much do you produce inhouse and how much do you procure from the market? Have you revisited your procurement strategy?
PKM: We have sufficient iron ore. Last year, we exported 117 million tonnes of iron ore. Thirty million tonnes of coking coal are required in India; 75% is imported and 25% is our own. Our coking coal is not high-grade, there is a lot of ash content. So we have to mix it with imported coal to get the right chemical composition.
gfiles: How is it that ICVL has not yet struck a single deal since its formation in 2007, whereas private companies have acquired several mines in Australia, Indonesia and African countries?
PKM: ICVL was incorporated on May 20, 2009. It has been set up as a Joint Venture Company of five of the largest PSUs of the country with the objective of acquisition of coal assets for meeting the current and growing requirements of its promoter companies – SAIL, CIL, Coal India, NMDC and NTPC. The global coal industry has gone through a process of consolidation in the past few years. The best coal deposits are now controlled by a handful of global mining majors. These companies have acquired most of the junior mining companies. Consequently, opportunities for acquisition of good coal deposits are limited.
ICVL has been aggressively scouting for suitable coal assets in target countries such as Australia, New Zealand, Mozambique, Indonesia, the US and Canada. It has carried out detailed due diligence of several coal assets and also participated in bidding processes. It has been given autonomy to make investments in overseas acquisitions up to Rs 1,500 crore in each case. It has also been vested with the powers of a Navratna company without formal Navratna status. Due diligence is being done by international bankers. Only proposals for acquisitions in excess of Rs 1,500 crore need to be submitted to an empowered committee of Secretaries who will make their recommendations directly to the Cabinet for approval. We do not anticipate delays on account of proposals which may need CCEA approval.
gfiles: The changeover from a specific rate of royalty to an ad valorem one under the new national mineral policy will increase the cost of iron ore and other raw materials....
PKM: Ad valorem is to lend elasticity to the duty, to the royalty and it was in per tonne (fixed amount). Now the government has changed it. It is a government policy, so that the royalty is reflective of the market demand-supply scenario. Prices are not determined by such factors but the international price mechanism.
ICVL has been aggressively scouting for suitable coal assets in target countries such as Australia, New Zealand, Mozambique, Indonesia, the US and Canada. It has carried out detailed due diligence of several coal assets and also participated in bidding processes. It has been given autonomy to make investments in overseas acquisitions up to Rs 1,500 crore in each case. It has also been vested with the powers of a Navratna company without formal Navratna status. Due diligence is being done by international bankers. Only proposals for acquisitions in excess of Rs 1,500 crore need to be submitted to an empowered committee of Secretaries who will make their recommendations directly to the Cabinet for approval. We do not anticipate delays on account of proposals which may need CCEA approval.
gfiles: The changeover from a specific rate of royalty to an ad valorem one under the new national mineral policy will increase the cost of iron ore and other raw materials....
PKM: Ad valorem is to lend elasticity to the duty, to the royalty and it was in per tonne (fixed amount). Now the government has changed it. It is a government policy, so that the royalty is reflective of the market demand-supply scenario. Prices are not determined by such factors but the international price mechanism.
‘SAIL plans to increase its saleable steel production capacity from the current 12 million tonnes to 23.13 million tonnes by 2012-13.’
gfiles: What is the status of the Indian Steel Alliance (ISA), an association of five integrated steel producers?
PKM: It has been wound up. I have not heard of this organization for quite some time.
gfiles: Keeping in mind the periodic tension between producers and consumers, and overpricing and marketing of domestic steel, should there be an independent regulator to oversee growth and regulation of the entire sector right from ore mining to the tariff structure for steel?
PKM: I’m not in favour of any kind of regulation. Steel was deregulated in 1991. The growth in the steel sector has been very significant thereafter. The regulated regime does not necessarily lead to best results. Second, steel was taken out of the purview of the Essential Commodities Act. Third, import duty has been reduced very substantially on steel products. So it is facing international competition, showing prices are competitive in India. So it doesn’t need a regulator.
gfiles: SAIL has signed a slew of joint venture agreements or alliances with various entities, the notable one being the shipping JV with Shipping Corporation, the coal mining JV with Tata Steel and the strategic alliance with South Korea’s POSCO. How many of the JVs have actually taken off? Do you have more JVs on the anvil?
PKM: SAIL has signed a few MoUs with international companies like POSCO. Some JVs are doing well, those in the power, cement and e-commerce sectors. Right now, the steel we make is based on coking coal and coking coal has become very expensive. So it is time we shift to alternative technology based on thermal coal because we have enough thermal coal. There are adequate thermal coal reserves worldwide whereas coking coal reserves are depleting. The day is not far when getting coking coal will become very difficult, maybe 20 years from now. So if we can bring new technology... SAIL and other private sector companies are in the process of forging alliances with non coking coal based foreign manufacturers of steel like Kobe Steel of Japan and POSCO of South Korea. Recently, JVs were signed with RITES for manufacturing wagons for Indian Railways. Another JV has been signed by RINL with Railways to manufacture axles for them.
gfiles: How has the steel industry grown in this fiscal and what is the projected production figure in the next five years?
PKM: The next five-year plan will be known only in one year’s time. The Planning Commission has been involved in this planning. We are making a five-year plan which is called a strategic plan for the purpose of a Results Framework Document (RFD). We have worked as per RFD and we have secured 106 points by the government. Some initiatives have been taken to strive towards the international benchmarks for production efficiencies and emission norms, such as lower power and coke consumption rate per tonne of steel, lower use of iron ore per tonne of steel and introduction of PCI & CDI.
In the new R&D policy, we want to identify the thrust areas, research them. How to increase efficiency of our plants based on indigenous raw material because indigenous raw material has certain peculiar characteristics like high phosphorus.
gfiles: What about major projects in the offing?
PKM: The steel industry is already open for 100% FDI. Arcelor Mittal wants to invest Rs 150,000 crore for making 30 million tonnes of steel. POSCO wants to invest for making 12 million tonnes. Some domestic players have also invested in FDI like JSW, Tata Steel, Bhushan Power and ESSAR. We are targeting 200 million tonnes of steel manufacture by 2020. The present capacity is 75 million tonnes, we have to add 125 million tonnes. So, to produce 125 million tonnes, multiply by Rs 5000 crore; it is Rs 625,000 crore in the next 10 years. Money is available and it will come.
gfiles: What about major projects in the offing?
PKM: The steel industry is already open for 100% FDI. Arcelor Mittal wants to invest Rs 150,000 crore for making 30 million tonnes of steel. POSCO wants to invest for making 12 million tonnes. Some domestic players have also invested in FDI like JSW, Tata Steel, Bhushan Power and ESSAR. We are targeting 200 million tonnes of steel manufacture by 2020. The present capacity is 75 million tonnes, we have to add 125 million tonnes. So, to produce 125 million tonnes, multiply by Rs 5000 crore; it is Rs 625,000 crore in the next 10 years. Money is available and it will come.
—WITH INPUTS BY NARESH MINOCHA
A group
On the police side, registration and investigation of FIRs is the most primary responsibility of the Superintendents of Police. But this has become a racket and a massive source of corruption, forcing citizens to go to District and High Courts to seek relief. The general public has to pay bribes and compromise its dignity in the process. 
Sardar Patel had his way and the AIS was established to “give a fair and just administration to the country and manage it on an even keel”. To ensure this and safeguard the civil servants from the “vicissitudes of political convulsions”, these services were covenanted in the Constitution. 
The worst feature is that information about the 2G spectrum, CWG and other scams has been in the public domain for quite some time and yet no action was taken while the nation helplessly watched the loot of the treasury. In the 2G spectrum case, the information indicates that, on learning of the bungling, you wrote to the Telecom Minister, restraining him from allotting the spectrum without your permission. Despite that, after a while he issued allotment orders. He reportedly had the audacity to inform you of the allotment and you merely acknowledged his letter. The public has been discussing the issue for the past two years and certain knowledgeable sections have displayed all this correspondence. When it came to allotment of 3G spectrum, people’s groups exercised such pressure that the Minister could not make arbitrary allotments and had to hold an auction. That brought very high dividends and also focused the nation’s attention on the mischief related to 2G spectrum.
JPJ: Another key strength of Morpho is our presence in India. We have been present in India for a long time. Almost 1,200 people work for Morpho in India, and this represents about 20% of our worldwide strength. Apart from being a significant commitment towards India, this represents our faith in the UIDAI programme as well as being a key factor that will help deliver success. Therefore, Morpho has long experience with Indian bureaucrats. Indian bureaucrats are not so different from elsewhere. They are dedicated to their job. So, they tend to be extremely meticulous in the process they adopt. Dealing with bureaucrats in India has been eased by our experience in India and our partner’s experience too. Plus, being an Indian consortium is a really good asset.
EVERY survey, carried out by different agencies, shows the military at the top of the people’s pick for probity, loyalty and selflessness. Citizens have put soldiers on a pedestal and feel let down whenever cases of their unbecoming conduct are reported. Even minor aberrations carry considerable shock effect. That is the reason why the amassing of illegal wealth by a bureaucrat couple does not impact public conscience while an Army chief seeking allotment of a plot is viewed as a questionable act.
ORGANIZATIONAL communication is issued to spread awareness both amongst its own members as also the general public. Its potency depends on the credibility it enjoys for honest, transparent and ethical reporting of fact, both favourable and unfavourable. It can be in the form of periodic newsletters, press releases or press briefings.