Budget 2013: Moderately pleased but more needs to be done, says JSPL

Power projects have been facing several issues over the past two quarters.

"The supply situation is not improving. I know it is a period of two hours in which he has to make the statement, but he could have atleast announced among intentions that he did, the government is working seriously to bring down lending rates," Uppal told CNBC-TV18.

Below is the verbatim transcript of Ravi Uppal's interview on CNBC-TV18

Q: What will be the impact of equalising the status between customs duty on steam coal and bituminous coal on your company? Does it immediately have an impact? Do you import any coal at all or will it shortly have an impact when your expansions get underway?

A: Before I comment on the individual custom duties, let me first say that the Budget, which was presented yesterday, is moderately pleasing.

The Finance Minister stayed within the parameters of what he has said earlier that he wants to maintain stability, he wants to build trust, he wants it to be a inclusive Budget. There was a lot of cheer for the banking and insurance sector because he focused a lot on the expansion and growth, but when it comes to the manufacturing sector there are two distinct things that he mentioned.

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One, they were quite favourable to the power industry and the steel industry, the 15 percent investment allowance that he announced was indeed a very welcome move and the period for which he has allowed it is two years. That will definitely be an impetus for making more investments within the steel sector as well as the power sector.

Secondly, the power sector extending the tax holiday for a period of one more year was a much needed relief. The power projects that are under execution, have been beset due to shortage of coal and many input materials including land and environmental issues.

If you give them one more year, it is a relief for them to wrap up their projects and get them on stream. So these were the positive ones where I thought that he could have done more was to stimulate more investment into the sector.

The sector has not been putting more money into it for want or demand and there is no demand. The supply situation is not improving. I know it is a period of two hours in which he has to make the statement, but he could have atleast announced among intentions that he did, the government is working seriously to bring down lending rates.

Until the lending rates improve, there are not many people who are willing to come forward, to make more investments. So, that is one issue which caused me a lot of concern that nothing is stated even in terms of intent. As far as custom duties, a very small cosmetic change has been done, reducing the duty on the bituminous coal and putting the duty on thermal coal is not much of a change.

Thermal coal is used for the power plants and also in moderate quantities in the steel making. Increasing the duty on that was uncalled for. As it is imported coal works out to be so expensive and if you put more duties on that, duty and countervailing duty (CVD) that makes the job even tougher. So that was uncalled for.

On the bituminous coal whose quantity requirement is as it is pretty modest from the steel industry point of view is not much of a relief. I don’t think that any kind of changes made on these two coals are a matter of great consequence for the steel as well as the power industry.

Q: How much coal does Jindal Steel and Power import and how much comes from captive coal mines? Going ahead, will you increase the amount of imported coal?

A: We are commissioning new power plants and new steel plants. We are already importing certain grade of coal from our own mines in South Africa, which we call as anthracite coal. It is used for making steel and we have now opened our Mozambique mine from where we will be mining the hard coking coal. We will definitely bring that coal in to meet our internal requirement of coking coal.

But when it comes to thermal coal, importing for the power projects, our import volumes should be very much linked with how much capacity we build up. We are always comparing the cost of imported coal against the cost of the procuring coal locally. So, depending as to how the tariffs will be in future and what kind of projects we undertake, we will decide the quantum of the coal that we are going to import.

Q: You have fairly aggressive expansion plans as well as inorganic expansion in Australia also with respect to Gujarat NRE coking coal. Given that your financial costs have started rising sharply, will you be able to maintain this kind of an interest in acquisition in inorganic moves?

A: We are always searching for minerals because they are a critical input to whatever business we do whether it is steel or power. So, for us the need is indispensable. We always look for option from where we can source coal or iron ore of acceptable quality at minimum cost. We don’t get fixed or rigid on any option that we look at and are focused on optimising them in a dynamic setting.