Aim to produce 50% of India's oil needs: Vedanta

Keen on the Indian growth story, Anil Agarwal, Chairman of Vedanta said that he wants to meet the country's growing demand and aims to produce 50 percent of India's oil needs.

In an interview with CNBC-TV18, he said that the government has not approached the company with regards to further stake sale in Hindustan Zinc and Balco.

He further said that Cairn India is looking to invest Rs 30,000 crore in the next 3 years.

On the rise in global crude oil prices, he said that it is unlikely for the prices to move higher and sees it to range bound at around USD 50-60 per barrel.Below is the transcript of Anil Agarwal’s interview to Shereen Bhan on CNBC-TV18.Q: There has been no big announcement that has come in from Petrotech so far. Cairn, the game changer though, is trending on twitter, as I was just looking at the twitter timeline before we started the interview. So are you going to make a big announcement as far as your plans in India are concerned?A: Of course. We are very excited in India. We produce 30 percent oil of the country and I am looking to invest Rs 30,000 crore in our Cairn India in another three year’s time for producing oil. At the moment, we are producing about 250,000 barrels, around that. We are going to increase another 100,000 to 350,000 barrel and 100,000 barrel equivalent to gas. And my ambition, my vision is to produce 50 percent oil if the country.Q: I know that has been your ambition for a while, but how much of that is incumbent on what the government decides to do as far as its new production sharing contract is concerned because that matter is in the Delhi High Court currently. There is a possibility that the government may want 10 profit petroleum or hike to 10 percent profit petroleum. I know you have made this pitch several times around that you pay about USD 4.5 billion to the government by way of royalties and taxes. But are you prepared now for making this Rs 30,000 crore investment if things do not go your way?A: I am very confident. We are the highest royalty payer in the world. Even anybody look at today field, we are paying the highest. There is no question. This is the best win-win situation whereby we are in a position to produce this kind of oil and gas. We are looking this kind of investment and this is a very simple contract where they have said that if you produce commercial gas, you will get an extension of 10 years. And I believe this will happen. This is a democratic country.Q: So Barmer your contract expires in 2020, you are hoping that it will be extended to 2030. As I pointed out, the matter is in the high court. But if they were to change the terms as far as the payout for Cairn is concerned, would you be okay with that?A: There is no question because the production sharing agreement (PSA) contract clearly says an as it is basis. So I am very confident, at the same time, when I am paying the highest royalty this time. We have to look ahead. The government is looking not to make money. They want on transparent manner to maximise the hydrocarbon production. We are already trailing. If you look at in India, we need 10 companies like Vedanta to produce more oil. If you look in India, exploration is only 10 percent.Q: But what gives you the confidence, because if I were to look at another matter that has been in court and that is your plea to allow you to be export out of India, that plea has been dismissed. So what gives you the confidence that this is going to go your way?A: But if you look at, each of my case, whether I took over Bharat Aluminium Company (Balco) it took 10 years. If you took Hindustan Zinc, it took 10 years. So, we understand that the government has no intention, but because the business was with the hand of public sector, it is moving to the private sector. And it has to move on. We have to produce more. So I have to live on the hope. If I do not live in the hope and I do not believe in India then who else?Q: Since you talked about Hindustan Zinc and Balco and you talked about moving on, Piyush Goyal in an interview with me said that the government would like to move on as well and look at off loading this residual stake. Has there been any forward movement on that front, have you heard from the government, has there been any fresh conversation?A: We are having almost 76 percent shareholding. We are running the company. Government has intention to sell those shares. But, because of the certain policies, they have not been able to take the decision. Whenever they take a decision, we will be around. If they sell in the market, that is fine. If they give it to us, that is fine. But they have given us a company, we run it well. We increased the production 10 times, we given the best of revenue. We are doing what we need to do.Q: So you have not heard from the government in the last few months on this matter?A: No, we have not heard.Q: Let me then ask you about what we are seeing happen as far as the commodity markets are concerned. We finally seen a production cut coming in from Organisation of Petroleum Exporting Countries (OPEC), where do you see crude prices in the short-term?A: I do not see too much price to go up. I am looking around USD 55-60 per barrel.Q: So you do believe that it will cross the USD 50 mark and will be between USD 55 and USD 60 per barrel?A: It has already crossed the USD 50 mark. Today it is about USD 54 per barrel. But, I have to be ready for every eventuality. I have always made my plan around that USD 40 per barrel because we have to cut the cost. We have to be the best in the world. That is how I look at it. Anything that comes up is a bonus for us.Q: So, it is a significant bonus if you do believe that prices are going to sustain above USD 55-60, are you reworking your calculations now?A: What I am trying to tell you that being in India, we always tighten our belt. You have seen each of our business. Why are we successful? Because we are low cost. We hold to our cost. We are ready for the worst. And that is what I am saying that USD 40 is in my mind. But, USD 50 per barrel is the price where the oil business will run, not easy, but we will run.Q: Let me move away from oil and just ask you as far as metals are concerned because we have seen metal prices go up and move up as well. What is the outlook now as far as metal prices are concerned? Do you believe that you could expect a further up move from these levels?A: I have seen worst. I have not seen something like this, but I have seen in last two years. But things are changing. I am seeing whether it is iron ore, whether it is aluminium, whether it is copper, whether it is zinc, silver, every price is getting better and these are the prices required to sustain. And this is last two months, the price has moved up about 15 percent which has helped. Going forward, I do not see the same price to come back to what it was. It was 100 percent more, but about 10-15 percent plus-minus, this price is going to be there.Q: So, another 10-15 percent above the current prices.A: Can go up and there are chances where we always want to ensure ourselves that if it is have a hit, we can sustain.Q: Let me then ask you as far as the outlook in India is concerned currently because we have talked about what is happening with metals, we have talked about what is happening with oil. Of course, you still await regulatory clearances. Perhaps that will decide what you do with that Rs 30,000 crore investment number. But let me ask you about Odisha because you were just in Odisha for the Invest Odisha Summit as well. Production capacity at about 30-40 percent currently, where do you expect that headed?A: We will hit in one-year time about 90 percent capacity. I am very hopeful they will resolve our bauxite, they will give us enough raw material. They are working on one or two mines and I am very optimistic. What else? If I do not open up India, I have always said that the production of oil and gas, production of copper, production of potash, production of iron ore, these are the things which will make India.These are things which will bring Rs 3-4 lakh crore etc. for India to make it developed, to eradicate our poverty and create jobs. Vedanta is the only company in resource sector. Odisha is another Australia within India. So I am very hopeful. I was with the chief minister, I was with the government official, they have given me assurance after assurance that the bauxite mine will be available within 6 months time to you and hopefully we will run our production or plant at 100 percent capacity.Q: But let me also ask you about the merger synergies and you have crossed several hurdles that were in the way as far as your merger was concerned. What can we now expect as far as synergies are concerned starting 2017?A: My vision was to create a natural resource company out of India, because every continent has the company. BHP comes from Australia, Anglo come from Africa, Vale come from Brazil, Exxon comes from US and I say in India we have to create a natural resource company and that is what we are looking for and that is how the merger has taken place and I believe the issue should be finished by this financial year by before March.Q: By March you expect all clearances etc in place.A: Yes, absolutely.Q: So then what can we expect post that, what is it actually going to translate into then as far as business is concerned for you?A: Sterlite Industries will be a diversified metal company out of India, which will produce oil and gas, copper, zinc, iron ore and aluminium that is how I am looking. This is a nice mix of basket of the commodities to produce out of India and it is a win-win whereby government will get almost 30-40 percent of revenue. We will create a huge job and I am advocating all these metal to be processed in India with the SMEs and all the time I am after the 100s of SMEs to come up as a start-up to use this metal and produce process material for auto wheel, electrical for construction or anything else.Q: Since you talked about Sterlite Industries, let me also ask you about Sterlite Technologies because you have big plans there as well. What is the update you were planning to invest about USD 10 billion, you are talking about a semiconductor unit, you are talking about setting up units in Nagpur for LCDs and so on and so forth what can we expect now as far as Sterlite Technologies and your investment plans there?A: We have a two business. It was a one business when we demerged about 12 years back. We kept separate the our cable business that is what has been advised by the banker to us and we have taken away all the mining business and resource business in one company - - this business has grown very well. In that business we have again two business one is on the technology side we produce third-largest producers of optical fibre. India has a huge requirement fibre, fibre to home. We are very excited about it. We have system integration, we have done lot of work for the defence, we have telecom software that is what we are doing.On the parallel we have a company which is demerged which is making a transmission tower and we are doing transmission tower all over India, one of the largest transmission tower producer. On the technology side we have to move on and our biggest India dream was to produce LCD glass. If you look at whether you talk about television, whether you talk the computer or whether you talk about cell phone everything need a glass, which is a major component and last 10 years India was contemplating to set up this, so we have tie up with the Maharashtra government. We are working with the 2 or 3 technology supplier and we are very excited this will cost USD 10 billion is a large project, but I can tell you the way the government has come forward to support this project we have never seen the way the land was allocated, the oil the licence was given, all the incentive was given to us and we are very excited to have this production to come up in 2 years time.Q: So you expect production to start in 2019?A: 2019 we are looking to have this LCD, but I am little nervous but very excited to have this project to come up.Q: Why you nervous?A: I was in Japan and all the Japanese companies come together and they says can we have a Japanese Industrial Park and I felt so good, because they say we will set up small-small company there to fit in, because they require speakers, they require transmission, they require electronic and they all want to set up - - so I am saying what our prime minister dream was for the LCD, if this happens so many industry will come, it is a new venture I am looking forward to complete this project.Q: You have been talking about investing in India, you continue to be the perpetual bull and optimist on India. But have things really changed on the ground in terms of regulation? You are still involved one way or another in arbitration proceedings against the government whether it is the Cairn PLC or it is even Vedanta. So, have things really changed on the ground for you as far as policy and regulation is concerned?A: I definitely see the change. The attitude has changed. People have understood how important is the local entrepreneur because there is a change. If you look at all local entrepreneur, what they have not given when the government has asked. They have given the world class airport, they have given world class telephone company, best of the steel companies. Anything government has asked from the local entrepreneur, they have delivered. And this is the place for entrepreneur is another America, land of opportunity, land of entrepreneur, so things have definitely changed. What I am looking at, what is happening, simplifying the policy where we do not have to go to the government and I am finding several plays whereby they are making a system, whereby things should happen as easy as possible. I am very hopeful. We have grown last 15 years in India.Q: 70 percent of your revenues are from India. A: 70 percent revenue from India, I acquire nine companies in India. Q: Are you looking at acquiring anything more in India? A: At the moment, nothing but will the government for the auction. I am going to take a very strong look and we will look at it. At the moment, there is nothing in hand. Q: Will 2017 be a significantly be a better year in comparison to 2016 across all of your businesses? A: I think so. Please wish me. I am looking forward, I have a great responsibility towards my people, my stakeholders, my shareholders and I am very excited. Q: But given where you are seeing commodity prices at this point and you are seeing the demand situation, do you believe that 2017 will be significantly better? A: One of the best years. Q: You expect 2017 to be one of the best years? A: Yes. Q: Can you quantify that for us why you believe it will be one of the best years? A: Because we have five months to go. I am looking this whole thing to be together. I expect our profit should be USD 4.5 billion and this is very significant. We have worked very hard, I am very proud of my team, the way the team has worked. So, I am looking forward this thing in 4-5 months working very hard to deliver better results. Q: And better returns on your investments in India? You have invested about USD 35 billion already in India so far. Perhaps, some would say that the returns have been somewhat disappointing, but do you expect now, a better return on your investments in India as well? A: Tell me, a boy come from Bihar, try, came to Mumbai, went to London, trusted you, they gave you USD 30-35 billion, I did not invest anywhere else, I brought it to India, invested here, millions of jobs have been created. What other accomplishment I need? I was always being very careful about the transparency and I understand how I have to have patience. In India, somebody wants things to turnaround over night will not happen. So, for me, I look at where else I can go. I come from here. People say why you live in London. If I do not live in London, how do I raise money? If you see, I have never defaulted. I have given return to all my shareholders. All my bond holders are very happy. All my banks are happy. All the people who worked with me are happy. What else do I want? Q: But if you believe now, India is the centre of the world, would you consider moving back to India now? A: I have been there for a long time. And is a structure where people are comfortable with and people will like to invest there and I would like to hold on to that structure if possible. But my heart is here, working is here, whether I live in Mumbai or London, same thing. Q: You said 2017 is going to be one of your best years. A: 2017-2018 will be one of the good years for us. Q: Now you are changing from best to good. A: You can take it as best. Why should I come down? I fully agree with you, but it was a difficult time we have gone through. Q: Yes, you have gone through a difficult time. You gave me some sense of profitability and what you expect in terms of profitability, but give me some sense of the size of the business as well that you expect that by 2020 what is the aspiration for you across your businesses? Where do you see the group? A: The way we are doing, I am looking forward, we will be 1 percent of the gross domestic product (GDP) of the country. I am looking forward, as I said, to produce 50 percent oil of the country, to produce maybe 4,00,000 barrels oil. I am looking forward to complete, to make 30 lakh tonne of aluminium. I am looking forward, iron ore to produce 50 million tonnes. I am looking our zinc production 1.5 million tonnes between Africa and here. I am very keen to produce 1,00,000 tonnes of silver. And apart from that, if I can be of any instrument to attract five more investors to come into India and invest. Q: You have been trying for a very long time. You have not managed yet. Are you feeling hopeful that in 2017, you will be able to attract global players? A: Not 2017, but people will come. I have been talking this morning with Petrotech and I have been talking with all the people and they are looking me as a partner and I said I am there and this is a comfort. And they are all looking to invest in India. They are on the fence. Q: When will they cross over? A: Let us both of us try for this. Q: So when do you believe that they will cross over? They have been sitting on the fence for a while and I know you have been on this campaign trying to attract global investors to come to India in the oil and gas space. When do you believe that is going to happen? Outside of BP, that was the last big ticket investment, we have not seen anything post that. A: We believe in the Bhagvad Gita. That says you do your best and leave the result on nature. So, we are doing our best and I have no doubt people will have a confidence. Where else we will go? China and India, in these two place everything is happening. Everybody is looking at and with this kind of government, open, at least they have a huge desire. They are hungry, they are open. I believe things will happen. There is no question things will not happen.