How are you assessing the financial health of the steel sector today?
Even today the banking sector is apprehensive about lending to the sector because at a time nearly ₹8 lakh crore of stressed assets—about 27-28%—was due to the steel sector. But all the 27% stressed assets belonged to the larger integrated plants and not the secondary players. The non-performing assets (NPAs) of the secondary steel manufacturers were less than ₹2,000 crore. I want the banking sector to start lending to the secondary steel manufacturers.
It is interesting that while the banks, which are under the finance ministry, lend, it is the steel ministry that is being asked to sort out the problem... take some action. In fact, we had started restructuring loans of the steel sector some two years before the Insolvency and Bankruptcy Code (IBC) came into existence and we were able to restructure loans worth ₹47,000 crore. And when the IBC process was announced of the 12 bankrupt companies, among the top six, five were steel companies. It was the best time for the steel sector because the turnaround and restructuring in the steel sector was already on.
The acquisition of bankrupt Electrosteel has been done and also that of Bhushan Steel. The original bid of the Tatas for Bhushan Steel, which had run up a debt of ₹44,000 crore, was to pay ₹35,200 crore to the bank, provide 12.2% equity to the lenders and ₹1,200 crore to operational lenders. Hence, banks may not have to take large haircuts as expected.So, there is a huge demand for the steel mills of the bankrupt companies.
What are your main priorities for the steel sector?
I want to give the highest priority to R&D and innovation. If we lack in these two areas, we will never be globally competitive, nor become one of the strongest economies of the world. Hence, the ministry has created an umbrella institution called Steel Research & Technology Mission of India (SRTMI) to focus on high-end research, and has already put funds at its disposal. It is not a completely new initiative, but we are ensuring that the knowledge available in various institutions like academic institutions, research labs of various steel companies, and individuals working on various projects is made available to all. This organisation will have representatives from secondary steel producers, integrated steel players, public sector entities like Steel Authority of India and even consumers, because they are the most important. Having a good brand and credibility is clearly not enough; you need to publicise your innovations so that more and more people come to know about them. I believe that SRTMI will make these innovations happen.
I am not happy with the fact that only 1.67% of our total production is going into exports ... we need to export at least4-5% of our total production,” says Birender Singh.
How are you ensuring that the regular boom-and-bust cycle of the global steel sector doesn’t impact India?
It can only be achieved by making steel the material of choice for the infrastructure sector since 75% of the country’s infrastructure is still to be developed. We have amended the General Financial Rules of the country to include the life cycle cost of a project, while awarding any infrastructure project. It will make steel an instant success because it provides a longer shelf life and lower maintenance cost for most projects like steel-intense roads, bridges, prefabricated buildings, water storage tanks, etc. Moreover, as consumption grows, so will the demand and production of steel. After several years, many countries of the African continent, too, will require huge amounts of steel for infrastructure development, and India should be in a position to provide that steel. I am highly optimistic about the future of steel but the only issue is that we have to be ahead of the curve as far as R&D is concerned.
We have also launched a preferential policy treatment for the domestic steel manufacturers called “domestically manufactured iron and steel products” in government contracts, which run into thousands of crores. As long as the domestic players meet the required quantity and quality standards—the technical specifications—they would be given preference in government procurements. The government has also set up a standing committee, headed by the steel secretary, to ensure that the policy is strictly followed and complaints of domestic players are resolved in a time-bound manner. It has already helped the government save nearly ₹5,000 crore in the first year. These measures will help the domestic players get major contracts from public sector units like Oil and Natural Gas Corp, Indian Oil, Hindustan Petroleum, GAIL, etc. for building pipelines, crude terminals, refineries, etc. Similarly, railway tracks, especially along the coast (because steel is rust free) and steel coaches, which will be launched later will also help the domestic industry. Flagship programmes like 100 smart cities, Housing for All, Atal Mission for Rejuvenation and Urban Transformation and high-speed bullet and metro trains will all contribute hugely to increasing steel demand in the country.
What will be the role of public sector companies like Steel Authority of India in the future?
Public sector companies like Steel Authority of India and Rashtriya Ispat Nigam will continue to be relevant for India because of the size of the country’s population, and because they have some vital social responsibilities under the Indian Constitution. These companies have other responsibilities too—they have to start competing with integrated private sector players, too, and not just the secondary steel manufacturers. They also need to change their mindset and become far more efficient. I believe the government’s duty is to make these units more robust and competitive not just because they have certain social responsibilities but were launched when very few businessmen wanted to enter the core sectors.