Jindal Steel and Power has not been able to increase its power production and sales due to lack of new transmission lines, Sushil K Maroo Director & Group CFO, told CNBC-TV18 today. Maroo observed that transmission lines in the country are not enough for upcoming power plants.
"Hopefully, in a year or two more transmission lines will come up and this constraint will be taken care of and we will be able to come back to higher generation on a longer term basis," Maroo said.
The Delhi-based company's current tariff realisation is only Rs 3 per unit. Maroo blamed lower output, plant load factor (PLF) and sales as key reason for the low tariff realisation.
Jindal Steel and Power recently increased its steel product prices by Rs 500-1000 per tonne due to high raw material cost. Maroo said that prices are likely to remain at this level for sometime now, as the steel production and demand has come down recently.
On the company's raw material strategy, Maroo said that they are constantly in search of better raw material linkages. JSPL continues examining large number of companies in Africa, Australia and other regions for coking coal and iron ore linkages.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Can you take us through the price increases that you have taken for the month of March and what is the quantum?
A: We are largely into long products and so the price increase comes in because of the increase in many input cost. There is a transportation cost rise taking place and the other iron ore prices also going up, the coal prices having its effect because of the depreciation of rupee. The mixture of all these things has led to rise in the steel cost and that is how it has taken place. It is a generalised number, but largely it is more or less in product line-to-product line.
Q: What is the range of the quantum of this price increase? Can you give us exact figures?
A: The quantum is anywhere ranging from Rs 500-1000. It depends on the product line-to-line and how much remains and this is the price rise that has taken place because of the cost-push.
Q: How sustainable are these price hikes, the December price hike could not be sustained? Can this be in a situation of overall weakness?
A: It is very difficult to comment whether the price rise will be sustainable or not. Ultimately, the price rise takes place because of the cost rising. So, if the rise does not takes place then the margin gets squeezed, but whether there will be demand enough to accept this, only time will say.
However, because of various ground-level problems, many smaller steel companies and mid-sized steel companies are having a lot of problems. Iron ore availability is not there, coal issues are there, many other issues are there because of that their production level is also going down. So, the demand is going down, the production is going down. More or less the prices are quite comfortable that way.
Q: JSPL had indicated that they are looking at overseas acquisitions for raw materials like iron ore and coke. What about the Gujarat NRE coking coal deal? Is it through or has it fallen through?
A: You talked about two things – coking coal and iron ore. We are looking for coking coal opportunities and iron ore opportunities and Gujarat NRE deal has not fallen through. Infact, we wanted to increase the stake. Even if you want to increase the small percentage beyond 19.5 percent and want to go beyond 20 percent, you have to come up with an open bid for the total outstanding shares and have announced it accordingly.
We were never expecting whole lot of shares to come to us, but very marginal shares to come to us. We will come to know after some time as to how many shares we have acquired in this process. So, it is based on the expected line and that is one thing.
Secondly, we are still looking forward for coking coal opportunities. We are still examining large number of companies in Africa and Australia and other regions and some day will come back and tell you which deal we are going through.
Iron ore also, in Africa specifically, we are examining some of the companies. We had rounds of discussions, but it is very difficult to say when one deal get materialised until does the paper gets sign, the agreement is executed it is very difficult to comment on it. But yes discussions are on, so as and when it gets materialised we will come back to you, we are very seriously working on these two raw materials.
Q: How is the power sector functioning currently because in the past quarter we saw a dip in sales, dip in realisations and PLFs as well? What updates can you give us for Q4?
A: The tariff realisation is about Rs 3 per unit now and in the last quarter we had a PLF of 81 percent. In the past, we were producing about 95 percent plus PLF, but because of the transmission constraint we could neither generate nor sell more power.
There is a transmission constraint coming up now because more and more power plants are coming up and transmission line is not there to carry the power. That is why we are not able to generate more and are not able to sale more. Also, one side we are seeing southern region where the tariff is extremely high because they are suffering from availability of power.
In Eastern region, we have more power available, but we are breaking down the generating plants because we are not able to take it through to southern region. In a year or two more transmission lines will come up and this constraint will be taken care of and we will be able to come back to higher generation on a longer term basis.