'Govt should reduce excise on steel, not squeeze producers'

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: Shyam Steel is one of the many new players in steel that have come a long way from their beginnings as merchant mills or foundries. Shyam Steel—which prefers to call itself an infrastructure company—began with structurals, moved on to ferro-alloys, added stainless steel, went back to sponge iron and is now expanding into integrated steelmaking, apart from power and cement. Brij Bhushan Agarwal, vice-chairman & managing director of flagship SEL talks to FE’s Somnath Dasgupta on his group and industry plans. Excerpts:

How did you begin all this, how did you start off?

I inherited the family steel business—we had a steel mill at that time, 1993-94. We made medium structures and narrow flats, and our group turnover was Rs 50 crore. During those early days, when survival was a question, we drew up a five-year roadmap and decided to increase sales from Rs 50 crore to Rs 200 crore.

By 1997-98, we had started backward integration and opened the ferro-alloys business by setting up a manufacturing facility at Burdwan. After 17 years of our existing business, we added a steel mill in the Howrah-Kona area. In 1999-2000, when we hit our target ahead of the five-year schedule, we planned to triple turnover in three years.

We were able to create an integrated steel facility, first at Burdwan, by adding a sponge iron facility and then by doubling our capacity in the ferro-alloys business and creating a new plant. We set up the first automatic steel mill for long product TMT bars within ten months.

How is your company ranked as a steelmaker?

Today, as a manufacturing facility, we may be the No 2 or No1 steelmaker in the state. It would not be correct on my part to say that we were the pioneers, but ours was the first company in eastern India to brand TMT in the secondary market, in 1998.

Then, we diversified into stainless steel. We created the first integrated stainless-steel facility in the country in 2001-02. We started with around 1 lakh tonne a year, and export half the production. In 2000, we were able to complete this vision. Then, in 2003-04, we created another roadmap: further backward integration by adding a non-conventional power plant from waste heat and biomass.

In the northeast also, we plan to diversify by adding a ferro-alloy manufacturing facility. In Bengal, we plan to double capacity. In Orissa, we are creating another steel hub in Sambalpur. We have completed that integrated steel project, with a capacity of 0.4 mt, ahead of schedule.

Today, we are not just a TMT manufacturer—we are in steel, cement, power and hydro. In steel capacity, as a group, we are one of the largest if we combine the Bengal and Orissa facilities. Our total capacity today is less than 1 mt. This will increase to 1.5 mt within the next three years.

When did cement come?

We ventured into the cement business with Century Ply in 2003-04 with a plant in Meghalaya in the northeast. Meghalaya has limestone deposits. Today, we have a 20% marketshare in the northeast, which is the single-largest share.

What are your plans now?

We are now aiming to increase our captive generation capacity from 100 mw to 300 mw by 2009. We are adding another 0.5 mt of steelmaking facility at Jamuriah near Asansol.

What are your plans in power?

We have started work on a 1,000 mw power plant in Chhattisgarh, near Korba. Land acquisition is going on. This will be an independent power plant. We are trying to acquire some mines abroad. We are at an advanced stage of negotiations, so I would not like to discuss the details. We already have a coal block in Orissa for our plant there, but the Bengal plant is suffering for want of a coal block. I must say the Bengal government is making all efforts to help us.

What are your views on attempts to control steel prices?

These are all bogus. The government needs to be realistic. When we talk of a proper steel price, we should talk of regulatory control to lock the value of the raw materials, which is now missing.

Do you have an advantage over others in terms of input costs?

Yes, today we are the cheapest producer of steel. We are in one of the most suitable belts in Bengal, logistically, with an integrated steel plant. Power constitutes one of the major costs, and we’ve captive generation. We are a well-established player and our technology upgradation is continuous. We are using the latest technologies, both in power and steel.

Some foundry units feel the Indian government should ask China to give us good quality coking coal because we sell them iron ore…

That is crazy! It’s a global market; you have to pay a price that is driven by demand and supply. Even a country like America cannot do anything, so why are we talking about India and China? If India does not supply (iron ore), then Brazil will. I believe that government intervention should be more realistic in controlling the minerals. Today, the government supplies most of the minerals, so it has to either create a regulatory set-up or avoid talking about steel issues.

The government should reduce the excise duty on steel, which is a direct cost to the consumer, rather than squeeze manufacturers, triggering unemployment. The government can levy an export duty on iron ore fines. Prices of fines have gone up from $30 a tonne to $200 a tonne and an export duty will not stop buyers. Even a 20-25% export duty will not impact suppliers, nor will it affect Indian manufacturers. This way, the government can neutralise excise duty losses and the export duty will not be a burden for steelmakers.

What about cement price controls?

The government has already taken the required steps, but it should seek a long-term solution with a national policy. The Union government should motivate states that have the limestone and other raw materials so that more cement plants can come up. Imposing controls is a short-term solution. But the government is talking only of temporary steps like reducing the price or the duty.

What is your next goal, and where is your funding coming from?