‘India growth story strong, not interested in spending outside country’
Jindal Steel & Power (JSPL) is witnessing a marked shift in all its businesses. In steel, its focus is being driven by the domestic market with the sale of its last foreign asset in Oman. With a comfortable coal supply, the company, which had captive mines prior to deallocation, might skip the commercial mining auction. Managing Director V R SHARMA talks to Aditi Divekar & Shreya Jai about JSPL'S transition. Edited excerpts:
How is the steel demand pattern in the domestic market?
Domestic demand has started to pick up mainly from the infrastructure sector, which includes the pipe and irrigation industry. Alongside, investment in the defence sector has moved up considerably, driving growth. However, availability of labour is creating some issues, which is expected to resolve once the Indian Railways starts passenger operations in a full-fledged manner.
How are sales panning out amid the pandemic?
We are still exporting about 30 per cent of production and selling the balance here. We are exporting more to Europe and West Asia than to Southeast Asia, thereby keeping our dependence on China minimal. In the domestic market, in the value-added category, there are some grades where JSPL has no competition and we directly compete with either
Japan, Korea or Europe. Today, more than 50 per cent of our product basket is made up of value-added products.
Would you bid for coal mines under the commercial coal auction?
No one is interested in a coal mine now. We will participate, but that is not a game plan for us. Coal is available freely now and is needed for the next few years. I am sure even international firms will not be interested in Indian coal mining due to high ash content, and then they can’t export it as the cost would be high. Indian coal cannot be sold in the international market. It has to be utilised by the domestic industry only. If it can be given for free to the industry, the government should give it for free. It should be available just on the transportation cost.
JSPL is accessing coal supply through e-auction and government schemes. What is the status of coal supply there?
After a long time, it is a buyer’s market. We participate in open auctions of Coal India and its subsidiaries. The Centre is monitoring coal supply closely and Coal India is ramping up their production. There is no shortage of coal in the country.
Given that there is a surplus, shouldn’t the price of coal come down?
It must. There is no benchmark of price in auction. India has 350 billion tonne (MT) of coal and if we do not use this coal now, when will we use it? After 2050, this coal cannot be used. It is in the best interest of the country to use this coal for converting it to gas, methane, petrol, diesel, polyester, power, making steel. The Centre’s target of converting 100 MT of coal to gas is promising.
Centre is planning to bring down coal import to zero. How will it impact dependent industries?
Why should there be any imports? But if imports are stopped, Coal India should not become an arrogant organisation. Any import restriction by the government must be coupled with local availability. There is a significant quality difference between Indian and imported coal. Today, we are importing about 250 MT coal which is 500-600 MT of equivalent domestic coal. To meet the domestic requirement, Coal India needs to increase its production from 700 MT to more than 1.3 billion tonne. The government should not charge any royalty on coal. This would also reduce cost of power and would ensure one tariff across the country.
With Oman operations sold, you have no presence in the global market unlike your peers. What are your expansion plans?
The Oman asset sale helped us ease out our balance sheet. At present, we are not interested in spending outside the country at all. The India growth story is strong. In fact, the whole world is looking at India now. Here, too, we are looking at utilising our capacity fully and not expand any further. We are planning to increase the utilisation to 7.5 MT by FY21 and to 8.5 MT by end of FY22. There will be no capital expenditure in the domestic market. Whatever fine tuning is required, only that will be done.
How do you see the debt burden coming down after the Oman asset sale?
“WE ARE STILL EXPORTING ABOUT 30% OF PRODUCTION AND SELLING THE BALANCE HERE. WE ARE EXPORTING MORE TO EUROPE AND WEST ASIA THAN TO SOUTHEAST ASIA, THEREBY KEEPING OUR DEPENDENCE ON CHINA MINIMAL”
Our major priority after the Oman asset sale is to lower the debt burden. We have a debt of ~34,000 crore as of April. We will bring it down to ~23,000-24,000 crore by the end of FY21, which will include divestment amount of Oman sale. The larger plan is to reduce debt further to ~15,000 crore by FY23, taking Ebitda to ~12,000 crore from ~10,000 crore in FY21, and a turnover of about ~50,000 crore.
What is the status of demerger of your power business from steel?
It is under discussion. By next Monday, we will make some decisions after it is presented to the Board.