‘We should not allow export of any mineral’

Suresh P Iyengar Mumbai | Updated on December 29, 2014 Published on December 29, 2014


Six months after Prime Minister Narendra Modi came to power with promises of improving the economy, the pain points for many industries remain the same. There has been no respite from high cost for both consumers and manufactures despite wholesale price index touching zero. The acute shortage in iron ore availability and fall in demand have hit the steel industry. Seshagiri Rao MVS, Joint Managing Director, JSW Steel, spoke to BusinessLine on the way ahead for the industry. Edited excerpts:

Has steel demand revived?

There are positive sentiments and expectations that things will look brighter in the future, but on the ground, the problems remain the same. Steel demand is sluggish. A major worrying factor is the external economy, which is not doing well. The surplus steel production in countries such as China and (South) Korea is being dumped on India. Of late, we are seeing steel imports from Russia after the ruble crisis. These countries, which are not major steel consuming countries, rely on exports.

Is there a sudden spike in imports?

Steel imports in October and November have gone up by 136 per cent to nine lakh tonnes.

The trend is continuing in December as Russia came into the picture after ruble depreciated to 62 against a dollar from 32. Ruble had dipped up to 80, but in the last few days, it stabilised at about 62. So the depreciation is 100 per cent in the last few days. The sharp ruble depreciation is making exports of steel from that country lucrative. Russia is a major export dependent economy and with the steep fall in crude oil prices, they are trying to export whatever they can. It is really a matter of concern.

Has the ‘Make in India’ campaign made any impact on the steel industry?

India has the potential to make several products which are being imported today. We are capable of producing these items and reduce our import bills. We can also make many products for the global market. Make in India will become a success only if the policies are calibrated to take away the stresses the industry is facing.

How have the steel exports been?

Steel exports have fallen by 5.34 per cent in the first eight months of this fiscal whereas imports have gone up by 49 per cent in the same period. The numbers are more stalking if you look at 136 per cent increase in October and November. Whatever little domestic steel demand is there, it is being catered to by way of dumping through imports.

Why did JSW Steel return land in West Bengal?

The project got delayed due to factors external to us. We lost the coal mine in West Bengal. We thought we would be able to get iron ore from Odisha and Chhattisgarh, but it looks difficult now. State Governments want to use iron ore reserves to boost investment in their own State. In Odisha, they are saying 50 per cent of both iron ore fines and lumps should be sold locally. The restriction is applied on each mine in the State.

So unless each mine sells 50 per cent of their production within the state, they will not be allowed to sell it outside. Whether it is legal or illegal, we can debate forever, but the fact is that there are restrictions in each State. We have put the West Bengal project on hold.

At the same time, we decided to return the land acquired from private land owners through the Government of West Bengal because the acquisition also happened through them.

Will JSW Steel bid for coal mines being auctioned?

Yes, JSW Energy will bid for thermal, while JSW Steel will pitch for coking coal. Steel and cement companies have to place forward bids, while the reverse bidding is open for independent power producers.

In the forward bidding, price of coal or iron ore will be market-driven as the Government has no control on the selling price of the end product. In the case of power units, the selling price is controlled by the Government based on the cost of production. In this way, they have clearly identified mines and its end use.

How do you see demand for iron ore exports?

When the trade account deficit numbers were announced, there were some comments that the widening deficit was due to a fall in iron ore exports.

If you look at the total export of iron, it was 14 million tonnes (mt) last year. This year, it is about 4.5 mt so far. So, if you take into account the realisation of the export shortfall of 9 mt, it works out to $495 million.

The realisation from export of iron ore works out to $55 a tonne, leaving aside the $15 for freight. I wonder what impact this $495 million will have on the trade deficit of $16.8 billion in November.

On the other hand, the industry imported 6 mt of iron ore and in my view, it will go up to 15 mt. Instead of worrying on why we have not exported iron ore, we should be wondering why we are importing so much of steel and iron ore when it is available in the country.

Should iron ore exports be allowed?

We believe iron ore reserves are the competitive strength of the steel industry. Value addition within India should be the criteria for any mineral, be it iron ore, bauxite or coal. I am not talking about resource-rich countries like Canada or Australia, where they do not have domestic demand and have to live on exports. Look at what is happening in Indonesia.

They have come out with domestic obligation, so you cannot export. Indian companies, which have bought coal mines in Indonesia, have problem today in getting coal. Iron ore is very scarce commodity worldwide. Our iron ore is rich in Fe (iron) content compared to other countries. In fact, we should not allow export of any minerals.

Published on December 29, 2014
This article is closed for comments.
Please Email the Editor