FE: Given the funds constraint, how can the Government kickstart the economy?

AP: To kickstart the economy, it is necessary to have financial closure of infrastructure projects. "Actual Spending", and not merely "plan outlay", can help boost the economy. For resource mobilisation, it is necessary to provide a conducive environment for foreign direct investments (FDI).

FE: Last year, there was an increase of 35 per cent in plan outlay for energy and transport. How did that actually benefit the steel sector? How much hike in outlay would you like this year?

AP: The real benefit to the steel industry will accrue when projects in the various sectors, including power, energy, roads, ports, highways, and housing, take off. The policy framework needs to be clearly spelt out. Regulatory authorities are yet to be set upin many cases; those which have been set up are still marking out their areas of jurisdiction. Fresh investment proposals have declined from Rs 386,931 crore in 1995-96 to Rs 320,084 crore in 1996-97, and further to Rs 233,493 crore in 1997-98. In the first half of 1998-99, fresh proposals were worth only Rs 104,367 crore. The declining trend of FDI is alarming as it has a bearing on steel demand. To counter this, it is important to encourage private-sector participation by increasing capital subsidy and giving financial guarantees to financial institutions (FIs). The decision to repeal the Urban Land Ceiling Act has been welcomed not only by the real-estate developers and urban planners but also the steel sector. This will ease land prices making housing more affordable. The steel sector has a good chance by promoting steel as a multi-dimensional construction material and thereby increase its consumption. But investment required for urban housing from 1997-2001 is estimated at Rs 5,260 billion. Since this isa burden on the exchequer, the new housing policy needs to woo private participation, for which fiscal incentives need to be worked out.

FE: How could the Government help in reviving long and flat steel products in India? Are you also looking for a change in policy for the auto sector, which, in turn, can revive fortunes for both flat and alloy steel products?

AP: Government efforts to revive the commercial-vehicles segment by a more liberal depreciation package has been much appreciated by the steel sector. Doubling the tax rate to 40 per cent, limiting the life-span of commercial vehicles to 15 years would revive this sector, and thereby, increase steel consumption for both flat and alloy steel products. The financial closure of infrastructure projects, particularly power plants, will generate demand for plates, structural and construction materials. Besides, use of asbestos sheets, being a health hazard, should be banned as is the case in most developed countries. This will help increaseconsumption of galvanised corrugated steel sheets.

FE: Does the excise-duty structure need modification, and if so, why?

AP: The simplification of the central excise-rate structure should receive priority apart from lowering the duty from 15 per cent to either 13 per cent or 10 per cent for the steel sector. Taxes, duties and freight together constitute about 30 per cent of the steel price. The incidence of excise duty on steel has risen since there has been a shift from specific rates to ad valorem. Steel is a basic input for all industries, and any measure to make it price-competitive will not only prevent substitution by other materials but also help in increasing the per-capita consumption that is currently at the level of 22 kg per man year, which is very low compared to other countries. It is expected that a lower excise duty will actually be a revenue-neutral measure as a drop in excise will be offset by higher consumption.

FE: Do you favour any change in the import-dutystructure on raw material and finished goods?

AP: For a level-playing field in the steel industry, it is necessary to maintain a 4 per cent special additional duty (SAD) on imports of iron and steel items. This is primarily to offset the incidence of domestic taxes like sales tax and octroi tax, which remain uncompensated to domestic steel producers. Accordingly, we have proposed that besides retaining the special customs duty of 2 per cent + 3 per cent, it is necessary to have an average rise of 5 per cent in customs duty, which will still be less than the bound rates agreed with the WTO. We also appeal to the Government to reduce or exempt the basic duty on imported coking coal, particularly since the coal of the right quality required for our integrated steel plants is not available indigenously.

FE: What about allocations for retraining and retrenching workers?

AP: Workers in sick companies should be duly compensated by offering attractive VRS packages to enable their closure.SAIL particularly requires rationalisation of its manpower, which could be funded by the Government. Such investments could be recovered later by improving market capitalisation and offloading of shares.

FE: Last year, the Modvat benefit was reduced to 95 per cent of input cost? Do you think any change is required now?

AP: In last year's budget, the Modvat was limited to a maximum of 95 per cent, which had an adverse impact. This year, we hope the Government reverts to the system of allowing 100 per cent Modvat benefit.

FE: In your opinion, what is the best solution considering the Government's resource constraints?

AP: Considering the Government's resource constraints, it is essential to speed up the privatisation programme of the blue-chip public-sector undertakings. In the case of SAIL, it is essential to expedite the restructuring plan, including financial restructuring, which is at present with the Government, and will facilitate the privatisationprogramme.