 "T V Narendran")
Tata Steel will start commercial production at its three million tonnes (mt) capacity plant at Kalinganagar, Odisha, from April 1. The production will start at a time when the domestic industry has been facing one of the toughest years in recent year that led to the government imposing a minimum import price. T V Narendran, managing director, Tata Steel India and Southeast Asia, tells Abhineet Kumar about how the company and the industry are coping with this challenge. Edited excerpts:
Is the steel industry well protected now, with the government imposing a minimum import price (MIP) in response to industry's demand?
It is supported. We cannot say protected. Steel industry has never asked for protection. Steel prices have been going up and down for the past 10-15 years. The reason why the industry started making a noise is that prices went back something like 12 years in the matter of 12 months. So, when the industry went through such a rapid deterioration in prices and one of the major producing and exporting countries is having a slowdown, then we need to respond. And all economies of the world, whether the US or Europe, have responded. We are a capital-intensive industry, investing in a country where cost of capital is high. And it takes a long time to build a steel plant. So, it would be unfair to say the industry would not be affected by what is happening. It cannot be left to sort out its own problems. India is one of the most open countries from an investment point of view. India allows you to set up a steel plant with 100 per cent foreign direct investment (FDI). Anyone who wants to participate is welcome to come and build a steel plant in India.
But this is not helping bring down the input cost for many industries that use steel to make their products.
I respect the view of the consuming industry. All of us are under pressure of input cost. I do not want to undermine their issues. First, there is a noise that exports will be uncompetitive. Anyone who is exporting can bring in steel duty free; the government allows that. Second, how much is the steel as a percentage of cost for many of these industries? Prices have dropped 40-50 per cent, but it has not gone to the customers. We are the most capital-intensive part of the value chain. Nobody else has spent Rs 20,000 to Rs 30,000 crore to set up a factory.
Steel prices are today less than what they were was one and half years back. It is not that prices are unusual. MIP is not at which the input cost would be, MIP is only a part of input. There is enough capacity in India that is more than demand. Prices will find their own level. All that has happened is import has slowed down. There are enough players who will fight tooth and nail to get their share of the business.
May be the reaction is a bit more than meeting reality. Prices will be determined by market forces and there is enough supply. The industry needs to make some return to justify cost of capital.
Does the current demand-supply gap in the domestic market worry you, especially when you are expanding at Kalinganagar?
Tata Steel has a view that we should always be competitive. Very often it is said that the Chinese steel industry is more competitive than the Indian industry. I beg to differ. You can call the Chinese industry competitive if they are making money at these prices. With losing money you cannot call them competitive. Tata Steel is one of the lowest cost producers in the world. That does not mean that I have to sell cheap, that will be unfair to shareholders and unfair to requirements of Tata Steel to grow. From the market position, we continue to be one of the lowest-cost producers in the world.
When we expanded Jamshedpur from seven to 10 million tonnes, gross domestic product growth was 7.5 per cent. The auto industry was sinking, but even then we did not have problem in what we produced.
What are the expectations of industry from the coming Budget?
We would like government to spend on infrastructure. Private sector investment has not been good so far. There is no better way to spur growth than public sector investment. Infrastructure investment has been good for demand. In the past year, we have seen a lot of movement on roads and railways and I hope that there is more of it. Then we are talking about ports, power plants - if the government continues to invest on these then it is good.
