Steel demand to rise post Sept, prices to hike: Essar Group

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The cabinet has finally approved the Land Acquisition & Rehabilitation Bill. In the next week, the bill will be introduced in the parliament, before the end of the monsoon session on September 7. Once it is introduced, it could be sent to the Standing Committee for consideration.

Speaking to CNBC-TV18's Latha Venkatesh and Soniya Shenoy, J Mehra, director of Essar Group , said that as far as the bill removes uncertainty and makes the land acquisition job easier, it will give much relief to the companies in the metal and mining space and will also attract investments.

"Steel demand will pick up September onwards. Expect prices to increase on the back of rising raw material costs," added Mehra.

You shouldn't miss this- Land Acquisition Bill: Experts weigh pros and cons

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: What have you made of the land acquisition bill being approved? How much of a relief would it be for companies in the metal space, who have been for long waiting for issues like coal blocks, backward integration to speed fast?

A: While the bill has laid down the roadmap for acquisition, which has been a serious issue, its implementation is going to be a tough call. In that case, you are making companies liable of taking care of the land sellers, in terms of which its implementation will problems.

Q: There is a provision that it is only the payment of Rs 2,000 per month per family as annuity and a similar amount for people who live off the land. Don't you have any responsibilities beyond that?

A: There is also an appreciation of land, which would happen as a result of development, which is more difficult to implement than the payment of Rs 2,000 a month.

Q: According to you that might be the only piece which might throw moving traps along the way?

A: Yes.

Q: Do you think that it is a fair deal and it brings certainty? If that one provision was taken off, would you say that it would still make it viable for an industrial house to go and set up projects without the fear of uncertainty?

A: As long as it removes uncertainty and makes the job easier of acquisition of land, it would give a lot of relief to the companies in the metal and mining space and it will attract investments again.

Q: Don't you have any issue with rural areas getting paid more than the urban areas?

A: It depends on what is the size of the project. If you have a large project, then it will have a limited impact on the overall cost of production and the capex. But if it is a smaller project, then it will have its serious implications on the viability.

Q: From an industry stand point, there are a couple of these other deterrents. One point is related to consent of 80% land owners, which is not something that will be taken too well by the street and the high cost of acquisition. How much of a hindrance do you think that would be?

A: When you go for land acquisition, unless you have a large number of people agreeing to sell the land, you won't start off with a 10%-15% or 20%. This is because you are not sure what is going to happen to the rest. Invariably, you negotiate with a large number of people, which constitute the majority before you say you have done it.

Similarly, if one goes for any environmental clearance, there is a public hearing when you have to get the consent of 80%, which is reiterated in this new bill.

Q: These clauses are perhaps a little populist in nature and industrial growth may slow down. Do you think it may affect the GDP targets of the economy in any way?

A: Industrial growth has already slowed down. The GDP has also slowed down, investment in both public and private investments have dried up. It is more on the monetary and fiscal policies to do something with the land. Land has its own implications but drying up of the investments is essentially on account of the monetary and the fiscal policies.

Q: How are you looking at demand? Has it improved so much that steel companies have been emboldened to raise prices?

A: Yes. From September till about the end of the year, there has always been growth in the demand. They have been reducing prices till about August but from September onwards, the demand will pick up. Essentially, in this period if GDP has to register a growth of 7.5% to 8%, it needs to have lot of public and private investments coming into play, which should boost demand.