SAIL chairman Sushil Roongta believes PSUs will prosper in an open competitive environment with less and less government control. He tells Kunal Bose that he is all in favour of PSU disinvestment being carried forward. Excerpts:
You must have been witness to some profound changes in public sector culture during your over three-decade long association with SAIL. Do you think the changes are an inevitable fallout of economic reforms and compulsions of globalisation?
Yes liberalisation and free play of market forces have brought about many changes in the working of the public sector. The profoundness of some of the changes is easily noticeable. But why only PSUs, the Indian private sector has also become a lot more innovative as its risk taking propensity has risen in the post-1991 period. The pace of change continues to be fast and the market being the greatest leveller, both public and private sectors have responded to the change in an identical manner.
The economic circumstances in the past forced the government to be in the forefront of building basic industries like steel, power and oil refineries. Will you agree that the public sector could have achieved more had there been less of government control and ownership of PSUs?
No doubt the public sector would have done better in a less regimented environment. Our experience is control inhibits growth. Take the case of SAIL where working significantly improved in the wake of disbanding of steel price and distribution controls in 1991 and its being given Navratna status in July 1997. You will also notice that in the period following the government ownership of SAIL coming down to 85.82 per cent, the company is open to greater stakeholder scrutiny. Corporate governance structure has become robust and the dividend payout record encouraging. I’m all in favour of PSU disinvestment being carried forward. PSUs will prosper in an open competitive environment with less and less government control.
Tata Steel with Nippon, SAIL with Posco, ArcelorMittal with Uttam Galva and JSW with JFE of Japan are in tie-ups which should spell interesting results for India. Why these alliances at this particular point? Will not some of these go beyond simple technology transfers into foreign groups actively participating in building and running of new mills?
India is a market which will continue to grow for many years. That is why steel companies in developed countries, where there is not much scope for growth, want a foothold in India. As is their wont, foreign steel groups have chosen their Indian partners with great circumspection. I have no doubt the tie-ups will prove to be mutually rewarding. Technology we certainly need. Building of steel mills in joint ventures between Indian and foreign steel groups is certainly possible. But how soon and in what form such JV plants will be built remain anybody’s guess. You can say technology tie-ups are the first step towards JVs.
We are seen to be in a self-congratulatory mode when we say that our steel demand will continue to grow at a double digit rate. But the steel intensity of our economy is very low compared to the world average. Can you give a prescription which will double India’s per capita use of steel in the next five years?
The common wisdom is, focus on infrastructure development and growth of manufacturing sector will boost steel consumption. This apart, a big market for the metal will open up here provided steel is asked for sizes, quantities and at prices suiting target population is made available across the length and breadth of the country. Consumers in small towns and rural areas are still required to get their steel from outlets kilometers away adding to cost. This acts as a disincentive. I shall urge steel producers to make collaborative efforts in opening steel shops at all possible points in semi-urban and rural areas. We need to work with architects so that they recommend use of more steel than cement in construction work. The more established steelmakers should also start selling the metal on the net.
Steelmakers everywhere are angry that big miners could not only secure a nearly 100 per cent rise in iron ore prices but also got the yearly benchmark formula dropped in favour of quarterly price fixing. This has also happened in coking coal. Do you not think that the practise could be highly inflationary in nature?
While I shall not prejudge the merits and demerits of the new pricing structure, the fact is as demand remains strong, ore and coal prices may move up quarter-on-quarter basis. But as you have seen in 2008 and 2009, what goes up can also come down. You cannot separate commodities from price volatility.
But you will see much action in stocking and destocking of raw materials in case there is a high degree of price volatility. That will disturb normal production and inventory of steel. I hope the miners will use their profits for exploring new deposits, opening new mines and expanding the operating ones.
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International Coal Ventures of which SAIL is one of the five PSU promoters has not shown dynamism in spotting and then acquiring coking coal properties abroad. Is it because of diffused shareholding or management lethargy?
I will say neither. It is not that ICV did not identify any assets. But being in PSU domain, it is required to go about acquisition in a way which is different from moves by the private sector. You know coal blocks are hardly sold through the bidding process. Having said all this, I agree that ICV could have shown more aggression.
Steel somehow has come to be seen as an essential commodity here. So every time steel prices are raised, there are howls of protests. Will cross subsidisation like loading most incremental costs on steel products used by manufacturing industries and construction sector in order to spare steel needed by common man to build a house work?
It may not work in steel. Instead what should be done is to create sufficient capacity for the mass consumption items so that shortages do not cause retail price rises. At any given point supply should be more than demand.
SAIL is nearly doubling capacity to 26.2 million tonnes of hot metal by 2012. Where will SAIL be in 2020?
SAIL has a dominant position in the market and our constant endeavour is to raise our market share. Our ‘direction plan’ projects capacity of 60 million tonnes by 2020.
