NMDC's steel plant has a target of producing 3MT steel: Baijendra Kumar
Baijendra Kumar, Chairman-Cum-Managing Director, NMDC Ltd., talks about NMDC's production target by 2021-22, pricing outlook and its interest in tungsten in an exclusive interview with Zee Business.
Baijendra Kumar, Chairman-Cum-Managing Director, NMDC Ltd, talks about NDMC's production target by 2021-22, pricing outlook and its interest in tungsten in an exclusive interview with Swati Khandelwal of Zee Business. Edited Excerpts:
Q: National Mineral Development Corporation (NMDC) has kept a production target of producing 67 Million Tonnes per Annum (MTPA) by 2021-22. Do you think that you will be able to meet these targets in wake of pricing and other external forces?
A: The targets of producing 67MT by 2021-22 is based on studies that we did while planning NMDC's strategy and expansion plans. This target will be revised up to 100 MT by 2030. However, people have faith in us and believe that NMDC has capabilities to produce 150 to 200MT but we have kept a conservative target because we want to have a scientific approach while producing. We were able to produce 35.5MT in 2017-18, which was the highest production by NMDC since its inception. NMDC has the potential to do so as it has been doing the into the business for past six decades. We have the capital to invest as well as CapEx. In addition, we are creating Joint ventures with the state governments. I am confident that we will be able to meet the target and it will be backed by the kind of support that we are getting from industry people especially the steel industry.
Q: I would like to know about the outlook of pricing in view to the prices in international market, although it is a market-driven component, that you have at present because the prices remained unchanged for three months after the government asked to cap the same to reduce the existing volatility in the market.
A: See, I was not able to see such capping anywhere. In the case of business and industry, things are driven by the market. For instance, nobody will be interested in buying my produce if they are kept on the higher side and that is a reason that I will have to regulate my self and fix things in accordance to market. In fact, as a Public Sector Navratna Company, we believe in keeping our rates at a reasonable level as we don't have the motive to earn profit alone.
We have designed a flexible system to decide our prices and that's why we can revise the prices in a month or between the month. In fact, we have a formula.
We have developed a flexible system to revise the prices and it can be revised in a gap of a month or between the month. In fact, the prices are based on a formula. To be true, we don't apply the prices as per the formula.
Q: It is something wrong?
A: I know that it is wrong but we decide the prices after having an eye on the market situation as well as the demand of the steel industry.
Q: Then what is the outlook of pricing?
A: When it comes to pricing then we want to have a transparent and marketable system being reasonable to all stakeholders in the industry like steelmakers and pallet makers among others. In addition, I feel that the steel industry is going to be stable for the next 2-3 years and their stability will help us in having sound prices at our end. I believe that we will be able to sell our products at good prices in future.
Q: Let us talk about strategic sales and buyback, which was seen in recent past in case of NALCO and NLC India, as there are talks that NMDC will bring a buyback proposal in times to come. Can you let me know something about it?
A: See, our promoter, the government of India, holds 72.6 per cent stakes in NMDC. It follows a guideline while asking us or any other entity to go for the buyback program and the same will happen with us. I would like to about the buyback program of Rs 7,200 crore which was carried on two years back and we can go ahead with more buyback programs whenever we have surplus cash available with us and we are ready for the same at present.
In fact, the government has sent its request for the purpose to us and the board, which will make a final decision to go ahead with the idea or not, has asked it for more information. But we have commitments for which we will need CapEx for them and that's why we have put our point of view to the steel ministry and other ministries. Our call will be based on whatever the government says as we are not against any decision which will help the nation.
Q: You talked about the Capex and I think that you had a plan of Rs 6500 crore for FY 2018-19. As you are talking about expansion plans than I would like to know about the Capex that will be required above Rs 6500 crore and the process to manage it?
A: We haven't fixed the CapEx at Rs 6500 crore I don't remember the exact figure but it stands around Rs 3000 crore for the coming year. However, we are well placed to complete almost every MoU that we have signed with different departments of the government of India.
Q: NMDC has announced its plan to venture into steel making. Can you let us know about the long-term plans in steel making and the way you will be contributing to government's agenda of producing 3 million tonnes?
A: It was planned 5-6years back and the idea was backed with certain things like giving back to people of Bailadila, the place from where we have been extracting minerals since 1958 and have reached this place, by providing employment.
Secondly, the steel plant is not too far away from Bailadila, the place where we have our mines. It got delayed due to certain reasons but we are close to complete the project and hope that it will become functional in the next 4-5 months. I would like to add something to it and that is that there are people who question NMDC's idea to be into a steel making when you are competent in mining activities. It is a good argument but what I feel that if steel company's can mine, may be scientifically or unscientifically, then why should we stop ourselves from entering into the sector at least when everything can be outsourced. In addition, we will start with 3 million tonnes but I can say that it is the most modern steel plant in India now.
Q: Do you have any plans to increase the production target at the steel unit as your production as a miner is quite high when compared to steel production target?
A: We are merchant miners and will be offering our products to others. But, we don't have any commitments to limit ourselves at 3 million tonnes only. In fact, we have signed a MoU with the Jharkhand government and planning to come up with a steel plant. Not only this, but we have also brought a piece of land in Karnataka, where we can develop our own steel plant. But these plans will be brought into the picture after the mining auctions of 2020 are announced.
Q: It means that you will be participating in those auctions?
A: Yes, if we are eligible for it because there is a problem associated in the bidding process and that is that those companies can only bid if they have value addition capacity as well as inducing capacity. This means if you have a steel plant than you can bid and in case of absence of steel plant, you will not be able to bid in the auctions. However, we are requesting the central and state governments do not restrict us and allow us to participate and get a better price.
Q: There have been talks of merging companies like NMDC, KIOCL.
A: See, this is being discussed for a decade and that's why I can't provide my view on it but it is not a bad idea of having a larger public sector. Interestingly, I have read and heard about the plans through media but officially there has been no communication till now maybe it is there at a higher level. It is not a bad idea as we have seen a merger of banks too.
Q: Several companies are being sent to NCLT for resolution and it is a good time to pick up few good assets at better prices. Have you identified something over there?
A: No, we are not interested.
Q: Then, do you have any plan to grow inorganically or you wish to grow in an organic way only?
A: We have plans to concentrate more on our mining research and go for a more scientifical process for mining. Acquisition of companies is not on our agenda at all.
Watch this Zee Business video
Q: You have displayed your interest in Tungsten and have signed a MoU with Masan and Defence Metallurgical Research laboratory (DMRL) to explore tungsten investment opportunities in India and abroad. In addition, you have also bought gold mines. What are your plans?
A: In Tungsten, we have got MoUs with some companies and some of the public sector undertakings are also interested with us. Some people also gave us a suggestion about Kings Island of Australia, a place with a good concentration of Tungsten. But there is no point in acquiring something in an abundant quantity which is not useful to us. We will have tungsten that is needed in India. Interestingly, the MoU that has been done is enough and I am in touch with various organisations that are using it and if there is a market for tungsten outside government requirements then we will also look forward to it.