Hit by the iron ore export ban in Karnataka, India’s largest iron ore miner, Sesa Goa has cut its annual growth expectation to 10 per cent from 20-25 per cent. Business Standard spoke to P K Mukherjee, managing director, on how the company expects to achieve the targeted growth rate. Edited excerpts:
Despite the iron ore export ban in Karnataka, you managed to sell two million tonnes in the second quarter. Will it be possible to achieve 20-25 per cent volume growth in the current financial year?
Assuming that the export ban in Karnataka is lifted, coupled with easing of the logistical constraints in Goa, we are looking at ending the year with a 10 per cent growth. For FY11, we expect 22-23 million tonnes of iron ore sales, against the 20-21 million tonnes, last year.
Isn’t the 10 per cent volume growth falling short of your earlier guidance?
Well, we have done significantly better if you see the quarter-on-quarter performance. We have managed to achieve a 25 per cent volume growth, in spite of the export ban in Karnataka. The market is looking stronger now and we are expecting that Goa will add more volumes to the bottom line. The total volume growth of 20-25 per cent for the year will not be achieved due to external environments like the export ban and the monsoons in Goa.
How did you manage to increase the volumes from Goa despite a heavy monsoon?
We increased exports of iron ore lumps in the monsoon season. Exports of fines get restricted during the monsoons. From Goa, we sold one million tonnes in the quarter, against 500,000 tonnes in the previous quarter.
Is this volume growth from Goa sustainable?
No, it is not sustainable for the next two quarters. There is not much possibility of increasing exports of fines. Moreover, there are High Court restrictions on transportation. There are logistical issues in Goa and we expect to end the year with a 10 per cent volume growth.
How soon do you expect to get the Orissa operations back on track?
There have always been logistical issues in Orissa and after the illegal mining issues, there are a lot of bottlenecks. We are not looking at volumes from Orissa as the renewals of our long-term contracts with mine owners has not happened as yet. Therefore, we are going on a month on month basis with them.
What is the issue with the mine owners in Orissa?
Mine owners have been asking for large sums of money, which we are not ready to pay. The 10-year long-term contracts ended in March 2009 and we still haven’t been able to sign the new contracts.
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Your domestic sales have gone up. What is the strategy?
Our domestic sales have been in the range on 6-7 per cent annually. However, in the second quarter it was 10 per cent. We are trying to increase our domestic sales, although domestic customers are not ready to pay the export parity price. However, if the export ban continues, we willl have to sell more domestically. Therefore, we are looking to ramp up our domestic sales to 12-13 per cent in the current year.
Your target of 50 million tonnes by FY14 looks difficult now. . .
We expect to end FY11 with a 10 per cent growth, at 22-23 million tonnes, depending on various contigencies. We would like to reach a volume growth of 25 per cent in FY12 but at the moment, that too depends on various external factors. However, with back of hand calculations, I can tell you that at a 25 per cent volume growth, we might be able to touch 30 million tonnes in FY12. In FY13, we expect to reach 40 million tonnes, of which 30 million tonnes is expected from Goa and 10 million tonnes from Karnataka. We are not counting on Orissa at the moment, as it depends on the renewal of contracts with local mine owners.