Expect steel plant to be commissioned in Dec 2016: NMDC

Latha: I am a little in doubt about the numbers. What we got was that April- May iron ore sales fell 21 percent to 4.5 million tonne versus 5.7 million tonne in the same two months last year, you said 7 percent rise?

A: First, if we compare with the last year definitely the last year was the best part. If we see March- April of 2014 was one of the best periods for the iron ore industry. This year starting it is going down; we see that this comes in a train, in share everything. So, if we compare with the last year definitely it is down but now I feel the improvement will be there.

Latha: What is the sense you are getting, there is a problem in terms of a global iron ore prices falling as well as the rupee not depreciating much? Is this fall in ore because domestic steel is doing badly or is it that they are preferring imported ore?

A: As far as price is concerned, now it is firming up. A few months back, in March it was lower, almost gone less than USD 50 but now it is firming up. So I hope that demand is increasing. Positive trend is there internationally. I hope the price trend should remain within USD 65-70 now.

Latha: Is your product cheaper than imported iron ore now?

A: My product is much cheaper than imported iron ore. Nobody will import now as far as things are there. My price is almost a Rs 1,000-1,200 less at Vizag port than imported or landed price.

Sonia: Will you be reducing prices further?

A: We will definitely regulate our prices. I should say we are losing because we are almost ever lowest prices and now there is a chance of increase in prices as the demand increases. I hope the price will stabilise now.

Sonia: How much will you increase your prices then, say in next 2-3 months?

A: That I can’t tell you right now. We have to take strategic decision for the company at the proper moment. We will see what is the demand and supply situations and then take a decision when time comes.

Latha: More importantly we invited you to understand the impact of the MMDR Bill 2015 on your company. You have not provided any contribution to the District Mineral Fund would you have to start doing that now with the law requiring it? How much will that be in quarterly payments?

A: District Mineral Foundation (DMF) has not yet decided, regulatory authorities not yet decided how much DMF will be there. Law provided maximum it is up to 100 percent of our royalty. It can be 33 percent; it can be 50 percent so once the regulatory authorities rules will come out, how much is the District Mineral Fund then only we will able to decide, quantum of the amount will be decide only after that.

Latha: You paid about Rs 1,400 crore as royalty and cess in FY15 the hit could be anything from Rs 500-1,500 crore this year?

A: Just see what was the price last year? Royalty was there when September-October prices was Rs 3,000. After that prices came to Rs 1,900. So it all depends, it will be much less than that. Today our prices are in between Rs 1,900 to 2,000 and which was almost 50 percent more. If prices go down, the royalty will go down. So it is all a dynamic factor it will depend upon things so we can’t estimate. However, in percentage terms it can be estimated.

Sonia: What the expectation is as far as margins are concerned in the first quarter and the second quarter of this fiscal? In Q4 you had margins of 50 percent how much can be expect in Q1 and Q2?

A: Last year in last quarter I should the performance wise, it was, the ever lowest price of the year. Normally we have good demand in Q2 and Q3. I should expect the price and we will increase our production, supply it to all the domestic industries which we are required. I hope the import will not be there, because we have sufficient material with us we can mine more. We have an ambitious plan of 35 million tonne which we are still keeping for this year. So I hope my margins will remain at last year’s level or may be around that.

Latha: What ever you contribute to corporate social responsibility (CSR) will be adjusted against that District Mineral Fund contribution when it happens?

A: No, it is as per the rule. Whatever rules are there we will abide. We are doing our CSR in much bigger way. Last year almost ever highest CSR we have done is almost of Rs 180 crore. We have spent this mostly in Chhattisgarh. This year it will be more than the last year.

Latha: I am asking you a legal point, because your DMF is also a form of corporate responsibility. Legally can you say that I will give to DMF after deducting what you are doing for CSR or the other way around?

A: No, our spends on CSR and DMF will be separate.

Latha: What kind of expansion are you looking at?

A: My expansion plans are there in place. My steel plant which is in advance stage of construction, it is going on well on schedule which we indicated earlier. December 2016 the steel plant will start operating, construction will be complete and commissioning activity will start so it is well on time. By the time 2017 we will get steel production from this plant. As far as mines are concerned, we have just started our 11B mines in Bailadila sector which is 7 billion tonne mine. In March we have started the trail production.

Another mine Kumaraswamy mines which is very important mine it is in the last stage of construction. By August- September it will start trial production which is another 7 billion tonne. So we are increasing our capacity by 14 billion tonne in this year. Same time our pilot plan is almost ready, may be this month we will start trial production from pilot plant at Donimalai mine.

Sonia: How much will you be investing for this total expansion?

A: Last year we have done almost Rs 3,100 crore and this year capital expenses we have kept Rs 3,500 crore.

Sonia: What is the total cash that you have?

A: We have a cash of more than Rs 18,000 crore.