The steel industry is reeling under huge debt and fall in prices. Even as the domestic steel demand is recovering slowly, companies are facing the challenge of cheap imports being flooded in the market from Japan and Korea under the free trade agreement. Interestingly, the Union Cabinet has decided to renew long-term agreements for supply of high-grade iron ore to Japanese and South Korean steel mills. Under the agreements, India will supply 3.8-5.5 million tonnes annually for three years until March 2018. A clear case of supplying raw material and importing finished product. Sajjan Jindal, Chairman, JSW Group, shares his thoughts on steel industry. Excerpts:

How do you see the RBI concern over the steel industry’s huge debt?

I think the concern of RBI is valid given the various challenges the industry has to tackle. Moreover, the steel industry in India is at a nascent stage.

In the sense, much of the capacity addition in the industry has happened in the last 5-6 years and it is laden with huge debt. Steel prices are weak as the cheap imports have set the benchmark at low levels. The current slowdown in demand and onslaught of imports has hit the industry badly, and the RBI, as a banking regulator, has expressed its concern. As far as JSW Steel is concerned, we are in a much comfortable position to handle our debt and growth plans.

When do you see a revival in economy?

We are already seeing some green shoots, if one can call it so. In the first two months of this fiscal, the steel demand has grown over seven per cent against a growth of 2.5 per cent in the same period last year. However, the concern is steel imports has been rising steadily and being dumped on India.

We have taken up the matter with the Government. We are seeing demand pick up in the rural areas.

The government has also announced a series of investments in infrastructure projects and plans to build houses for poor. I think there will be a revival post Diwali.

Are you satisfied with the government’s recent hike in import duty?

Increasing import duty is not going to help steel companies as most of the consignments are coming from countries with which India has signed free trade agreement. Of the total imports in last two months, shipments from Japan and Korea accounted for 50 per cent. Increasing duty will not impact import from these countries as they have free trade agreement. The industry has moved the government to work out safeguard duty and anti-dumping duty on steel imports.

Why the steel industry should oppose if the user industry can get steel at a cheaper price through imports?

Indian steel industry is not averse to competition. We are objecting only the predatory pricing adopted by countries like Japan and Korea. Japanese companies sell steel at $570 (₹35,910) a tonne in their domestic market, while it is priced at $390 (₹24,570) a tonne for India. As it is, we have an unfair competition with these countries.

The lending rates in India are at 10 per cent, while it is close to one per cent in these countries. Countries like Malaysia and Thailand have imposed anti-dumping duty as soon as it saw steel being dumped on them. We have no complaints if any country is tapping the Indian market on its competitive strength.

Does the imported steel meet Indian quality standards?

There is a huge concern there. We have quality standards for steel produced in India, but very few for imported stuff.

Incidentally, even these quality standards on imported steel are hardly implemented. Buyers are happy to import these substandard steel without giving a thought on future consequences.

The industry had taken the issue with the Government and it has prepared quality standards for 16 items which will come into force soon.

I feel quality standards should be strictly implemented.

Are you satisfied with the auction process of natural resources such as coal and iron ore?

The auction has bought in the much-needed transparency in allocation of natural resources. The available resources are limited and there are many takers.

In whichever way you allocate it, there will be some heart burns. The Karnataka government should also auction the iron ore mines. Iron ore supply in Karnataka has improved substantially. We will cut down on our iron imports in the coming months. The annual cap on iron ore production in Karnataka needs to be increased. I expect the iron ore mines in Karnataka are put on the block soon.

What are your expansion plans?

I believe the power sector is in consolidation phase. We are looking at acquiring a company in the power sector. I cannot reveal more details as the discussions are still going on.

We have no plans for greenfield expansion in steel as we expect for returns from the past acquisitions.

A new internal task force has been set up to explore opportunities in renewable energy space. We are open to acquiring iron ore mines as and when it is auctioned.

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