Auto scrappage policy targeting CVs a way to start revival: Sajjan Jindal

If we are to become a $5 trillion economy, then we need at least 7 per cent to 8 per cent GDP growth, if not higher, says Sajjan Jindal

Sajjan Jindal, chairman of the $14-billion JSW Group, talks to Pavan Lall on what is driving his recent flurry of share buy-backs, JSW Steel’s expansion plans, and how a stringent auto scrappage policy would help in a turn-around. Edited excerpts: 

How do you see the economy shaping up?

The Indian economy is connected to global geo-politics and over the last year, a lot has happened. The US-China trade war took place as well as Europe and Japan went into negative growth. That also played big for India. It has been challenging and most economies have suffered in the past year. 

In that context, how do you see challenges in growing JSW Steel to the stated target of 45 million tonnes per annum (MTPA) in another five years which is more than double of what you are now? 

Our goal remains the same and the government has taken steps to kickstart the economy. If we are to become a $5 trillion economy, then we need at least 7 per cent to 8 per cent GDP growth, if not higher. A couple reforms were announced on Wednesday. The government will commercialise 100 coal blocks for miners. Interestingly, we import 150 million tonnes of thermal coal valued at around $15 billion. This is ridiculous because we are sitting on billions of tonnes of coal and importing it. 

Is there a quality difference of our own coal and the kind that is imported? 

The quality differences are with coking coal but even there we have huge quantities. With thermal coal, we have plenty but are importing. Similarly, after auction of the iron ore mines in 2020, there will be a huge price jump as per industry reports and will have a big negative impact on steel. The recent announcement of continuity of all forest and environment clearances for all iron ore mines for a period two years is a great reform. It will make the whole sector more aggressive and competitive at a global level.  

Steel has also slowed because of the pain in the auto industry. When do you see it rebounding?

An important step to address fast is the auto scrappage policy. We see old vehicles plying in the country which eventually end up becoming shops and stores. We must have a policy that scraps decade-old vehicles. As far as a turnaround goes, you can’t ignore young people who prefer to buy smartphones instead of cars and then use them for Uber and Ola. However again, a scrappage policy that targets commercial vehicles is one way to start a revival. 

What else can the government do to help stimulate the economy? 

There are moves to disinvest from Air India which will help. Seven airports have been privatised. The thought process is also on for privatising railway stations and unlocking value. You can’t have railways run the same way as 70 years ago. Let the railways not own a single wagon. If Coal India has to move coal, then let it own the wagon and if JSW has to move steel, then let it own the wagon. Tata Steel and NTPC should invest in wagons, not the railways. The privatisation of railways is a matter of mindset and is being looked at and will happen. 

The national steel policy envisages being globally competitive and having a crude steel capacity of 300 MTPA by 2031. How realistic is this, given India barely has a handful of players that produce significant tonnage?

According to me, by 2025, we would be at over 200 MTPA in consumption. If the consumption happens, production will follow. It takes around two years to build a new steel plant. So, I am not worried about reaching 300 MTPA in capacity. SAIL, JSW, Tata Steel, Arcelor Mittal and JSPL are the big five players and I think they will all grow.

You’ve been in pledged-share buyback mode to the tune of Rs 3,500 crore. Strategically, what’s been driving that?

Many large groups have, in the recent past, suffered because of loans against shares. That also becomes an overhang for the stock because it has been seen as a potential danger. So, we took a conscious call to get out of pledged shares. There’s still some pledged shares that we are yet to release, around less than half of the total amount which we hope to get done in the next year. The strategy is cautious aggression.

What’s your investment plan in the near future?

We, as a group, have planned a total expenditure of Rs 60,000 crore over the next three years. For steel, around Rs 45,000 crore and Rs 15,000 crore for cement, paints and energy. It ought to create around 50,000 jobs by 2025. 

What is the succession plan within the group?

Retirement age is 60 and if you’re on the board, it’s 65. I am 60 and haven’t decided when I will retire but I have a clear thought process on succession, which is, it won’t necessarily include a family member. The top challenges include finding a pipeline of leaders as well as dealing with disruption that does keep me on the tenterhooks, given how fast the world is changing. You can lose your competitive advantage in six months.