Steel secretary DRS Chaudhary speaks to FE?s Parul Chhaparia and KG Narendranath on the huge delays in the setting up of proposed greenfield steel plants, fall in iron ore prices and India’s potential to become a major player in the global steel market. Excerpts:

Have the big ticket greenfield steel projects like Posco been delayed/thwarted because of excessive bureaucracy?

There is no bureaucratic delay in the Posco project. The delay was mainly because of (lack of) environmental and other clearances. There are many issues like the compensation to the local farmers (which need to be resolved). The company (Posco) has made progress and hopefully, all these issues (relating to clearances) would be sorted out over the next few weeks.

What is the steel ministry?s view on the discretionary allocation of captive coal blocks given that some steel companies too figure in the CAG?s list of companies who could make windfall gains from the alleged largesse?

As far as the steel sector is concerned, the companies mainly require coking coal, which is not available in the country in sufficient quantity. Only one company ? Bharat Coking Coal, a subsidiary of Coal India ? produces coking coal. Most of the steel companies depend on imports from countries like Australia (for coking coal). The steel companies? demand for thermal coal is limited.

India, it was said, held tremendous potential to grow its steel industry thanks to the inherent cost advantage from rich raw material (iron ore) base and the buoyant demand for the metal in the economy that is in a high-growth phase. Between 2004 and 2008, many foreign steel companies indicated their plans to set up plants in India. However, we no longer hear about such mega steel capacity plans.

When it comes to capacity addition, brownfield expansions by local players ? public sector and private- must also be reckoned. Many of our steel companies have substantially increased their capacities in recent years and more capacities are being added by likes of Steel Authority of India, Tata Steel and Jindal Steel & Power. It is estimated that by 2020, India?s steel capacity will reach some 120 million tonne from 89 million tonne at present.

India is now a net exporter of steel, but by a very thin margin. Despite our cost advantage, our presence in the global market is inconsequential. Compare this with China which exported close to 50 million tonne last year even after meeting its humongous domestic demand of 620 million tonne. China produces 45% of the world?s crude steel and 58% of the pig iron.

India will always be a net exporter of the steel. Though the demand in the international market has come down, the domestic market is still better. We are the fourth largest crude steel producer in the world. Last year, we produced 89 million tonne (mt) steel, while the consumption was 70.92 mt. (Consumption is predicted to grow at 6.9% in 2012). There was scope to export. Now, with the capacities being added by many steel companies, there would be scope for higher exports and India would be net exporter of steel (over the next few years) as was recently mentioned by the Prime Minister.

How has the ban on iron ore mining in Karnataka over the past year impacted the steel industry?

I don?t think so. The ban did impact the local steel industry but not the steel companies across the country. There is no quantity issue (as far as ore is concerned). During 2010-11, the iron ore production in the country was about 200 mt and the consumption was 100 mt. Last year, the production came down to around 169 mt because of the ban and the increased export duty. But there was still over 60 mt available for exports.

Global iron ore prices have come down from $130 per tonne in January to almost $80 now. What do you attribute the price fall to?

The iron ore prices have fallen mainly because of the lower demand in China. China used to be a ravenous importer of iron ore until a couple of years back to cater to its huge domestic steel capacities. However, the domestic demand for steel in China has slowed. They have surplus steel capacity and their iron ore imports have reduced. This has affected iron ore prices across the international markets.

Is there a proposal to lower the export duty on ore (30% at present)?

As of now, there is no proposal to lower the export duty on iron ore. The idea (behind curbs on ore exports) is not to curb the quantity of exports. There should be no curbs in terms of quantity. We would rather encourage export of value added products (like finished steel) than iron ore. So, export duties could be justified.

Are you in agreement with the provisions of the MMDR Bill? Th steel ministry had earlier talked about a national regulator for natural resources like iron ore.

The steel ministry?s view is that priority may be accorded to end users (steel companies) in allocation of iron ore mining blocks, rather than trading companies.

Steel companies are worried over India?s Free Trade Agreement with countries like Japan and Korea under which import duties (tariffs) products including steel items are being reduced to zero over years. Will you take up this matter with the commerce ministry?

The FTAs are being negotiated and concluded at a higher level. As you mentioned, import duties are not going to be zero overnight. The domestic steel companies should try to bring their costs down to be able to compete Japanese and Korean firms. It is anyway difficult to keep steel products out of bilateral trade agreements or liberalisation under the multilateral (WTO) framework.

The WTO?s Dispute Settlement Body is considering an Indian plea against the imposition of countervailing duties (CVD ) on hot-rolled steel from India. What is the ground on which the US imposed these tariffs on Indian steel?

We have argued that the US move is inconsistent with provisions of the Agreement on Subsidies and Countervailing Measures and the GATT 1994.

They (the US) say our exports are subsidised and we have strongly contested this and hopeful of reasonable resolution to the dispute. The Steel Development Fund (SDF) which they dub as subsidy is hardly one, because it is not a government fund.