Country must fix iron ore pricing mechanism: Dilip Oommen of AM/NS India

In a Q&A, the CEO of the firm calls for the launch of the National Mineral Index for Steel, which he says has been delayed

Early 2020, ArcelorMittal India won the Thakurani iron ore mine in Odisha by agreeing to pay a 107.55 per cent premium. The mine was to meet requirements of ArcelorMittal Nippon Steel India (AM/NS India), but as it charts out major expansion plans, Dilip Oommen, chief executive officer, AM/NS India, tells Ishita Ayan Dutt that for future raw material securitisation, it will only go with fair premiums. Edited excerpts:

ArcelorMittal Nippon Steel India has laid out a plan of increasing steelmaking capacity to 30 million tonnes. What is the timeline for achieving the target?

The groundbreaking for downstream has been done and for Phase I, which will take the capacity to 14.5 million tonnes, is expected to happen by December. We will put this on fast track and subsequently go to 18.5-19 million tonnes at Hazira in the next phase. Meanwhile, we are looking at Odisha. We want to develop at the existing Paradeep site and also there is an alternative land parcel (Kendrapara) for which we have signed an MoU (memorandum of understanding) with Odisha. Both options are advancing well.

Is Paradeep an alternative to Kendrapara?

It is in addition. We are looking to set up a steel plant of, may be, six million tonnes capacity at Paradeep. At Kendrapara, we are looking at another 12 million tonnes.

You have been shortlisted for Neelachal Ispat and inorganic opportunities are coming up like RINL and NMDC’s steel plant. Would you be participating?

We are always looking at opportunities that fit in with our strategic plan, whether it is mines or steel plant or ancillary units.

Iron ore mines will come up for auction in Odisha. Would AM/NS India bid?

Certainly, we will participate in the auctions for raw material securitization of our expansion plans. Having said that, the country needs to fix the iron ore pricing mechanism. Iron ore prices in Odisha are just too high and it is certainly not sustainable. The Indian steel industry is losing its edge because of the iron ore pricing. There are states where lower grade iron ore is priced much higher than the rest of the country.

We need to have a fair pricing mechanism. The National Mineral Index for Steel has to be launched. It is already delayed.

Last time, players including AM/NS had bid at a huge premium. Will there be a repeat?

Participants have realized that the existing pricing is too high and not sustainable at all.

Currently, what kind of iron ore security does AM/NS have?

We have two mines. We won Thakurani in the last auction which is operating in full swing. Sagasahi mine is expected to commence operations shortly. But for our future growth, we will require more mines. We will only go with fair premiums. Just because we want securitization does not mean we will forget cost effectiveness to remain competitive.

Is there a possibility that you might give up Thakurani and bid at a lower premium for blocks?

We are in full production and will definitely not give up. Once we go ahead with a decision, we stick to it. I can only say that the pricing mechanism today is very unfavourable and hurting us. The government needs to have a solution as early as possible.

In the June quarter, AM/NS India recorded an EBITDA of $607 million. What was it at the time of acquisition?

There has been significant improvement over time. We have been focusing on reducing our cost. That exercise is still on. Also, we have been looking at ways and means of improving the revenue streams by branding our products and looking at distribution models. Now, we will be looking at growth and various aspects of sustainability and technology.

Globally, companies including ArcelorMittal, have set decarbonisation goals. What kind of technology is AM/NS going to adopt for its expansion plan?

Today, AM/NS India is best placed in terms of sustainability initiatives because of the expertise that it has from ArcelorMittal and Nippon Steel. If you look at our emission level production, we have already achieved 30 per cent reduction with respect to 2015 levels

Are there any plans of integrating operations of Uttam Galva and AM/NS India?

The last leg of the NCLT process is still on. Once that is done and everything is cleared, there will be a lot of synergies between Uttam Galva and our existing downstream.  

It’s been more than sixteen months since the acquisition of Essar Steel, how far have you been able to resolve the issues around ancillary units?

We have made significant progress as far as power is concerned. We acquired Odisha power plant and Bhander power plant in Hazira and OSPIL (Odisha Slurry Pipeline Infrastructure). We are in discussions with relevant parties to ensure that we come to a settlement on other ancillary units.

The Madras High Court asked for a probe into alleged cartelisation in steel. What are your views?

We maintain the highest standards of corporate governance and abide by all the rules and regulations of the country. If at all we are asked to participate in the probe, we will cooperate fully.

How is domestic demand picking up?

Domestic demand was sluggish due to the second wave. But internationally, it did well. In India, recovery is happening. We hope that the government will continue to invest in the infrastructure space.