Union steel minister Virbhadra Singh wants creation of capacity to keep pace with growth in demand. He believes the only way to surmount the problems in land acquisition for mega projects is to have a more humane approach to compensating land givers. In an interview with Kunal Bose, he says the capacity consolidation he is promoting in the public sector will make it more vibrant. Excerpts:
You are claiming the roadmap you have authored will create new steel capacity at a rapid pace.
Look at the compulsion. Since April, the demand for steel in the country is growing at a much faster rate of 6.6 per cent compared with the production growth rate of 2.7 per cent. I have no doubt that the demand will start rising at more than 10 per cent a year once we are back on a 9-plus per cent GDP growth track. So, it is essential that we achieve steel capacity of 124 million tonnes by 2012 and about 150 mt by 2015.
To start with, my focus is on expanding capacity of public sector steel mills, as all of them have surplus land and other infrastructure at their disposal. At the same, I shall facilitate development of the private sector.
But the big-ticket investments in new steel mills proposed by domestic and foreign groups are not only not off the ground but some have been mothballed.
I’m hopeful that 33 mt of brownfield capacity will materialise in the next three years. A number of small and medium projects in the capacity range of 500,000 to a million tonnes are also fast coming up. Moreover, the secondary steel sector, including electric arc and induction furnaces, sponge iron units and standalone rolling mills is growing well.
While projecting a capacity of 124 mt by 2012, I haven’t taken any credit for what ArcelorMittal and Posco are planning to build here. At the same time, I’m told that Tata Steel with its 3 mt plant in Orissa, Essar with its 6 mt project also in Orissa, and JSPL with its 2.5 mt unit each in Orissa and Jharkhand have achieved substantial progress.
A combination of land acquisition difficulties, failure to deliver on promised mine linkages and the world economy meltdown has stalled quite a few big investments. How do you propose to go about this?
The large integrated steel projects need up to 6,000 acres of contiguous land, with easy accessibility to highways, rail network and ports. Their viability will also depend on their getting mines’ linkages. Till land, infrastructure, logistics and mines are in place, promoters of such projects will not be inclined to bring in money. The issues involved concern various ministries and departments at the central and state levels. I can say that the inter-ministerial group is making good progress in identifying and also getting sanctions for critical infrastructure projects concerning the sector.
I make a special mention here of the Posco project in Orissa. The difficulty in acquiring land has not stopped Posco from making progress on other fronts. The objective is that once the land is there, no further time is to be lost in building the mill.
State governments don’t have ownership of lands in such large parcels as to accommodate mega steel mills. But promoters of such projects have had little success till now in land acquisition. What should they be doing to get the land without causing social unrest?
Let there be a more humane approach to land acquisition. We need to keep in mind that the people being asked to make room for steel or any other projects have been making their living from the land. Not only should landowners be given adequate financial compensation, but a thought has to be spared for their sustainable living once they have quit the land.
I’m in favour of creating an annuity for land givers. Similarly, opening of new mines will become easier if a portion of the income derived from minerals is given to the indigenous people who are asked to move away from mine areas.
Will you also encourage consolidation in the private sector, where we have many small mills which suffer more in times of commodity bust?
Merger of some small units with the appropriate big (state-owned) enterprises under my ministry are carried out with the objective of deriving benefits of synergies, economies of scale and optimum capacity use. Moreover, I’m encouraging alliances among PSUs to build joint ventures for mutual benefits.
Capacity consolidation in the private sector is, however, a market driven process, where the government can’t have a direct role. At the same time, PSUs could have joint ventures with private companies in select areas but within prescribed guidelines. There is plenty of scope for public private JVs in the special steel segment, where the country has to make up a lot of leeway.
It seems the state sector has a special place in your scheme of things.
I have been brought up in the tradition of Nehruvian socialism and I have no hesitation in saying that I have a fondness for the public sector. I believe for PSUs to deliver results they should be given the required autonomy and there should not be any interference in their day to day work.
While this being so, I’m aware that without the private sector going full throttle in capacity creation, we shall fall short of the ambitious targets by a long margin. My job is to create an ideal condition for steel projects to take off, irrespective of the public and private sector tags. Going beyond, I want steel and steel-related ventures being jointly promoted by public and private companies.
