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Iron fist, velvet glove PDF Print E-mail
Wednesday, 26 January 2011 00:00
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The first time I met Sajjan Jindal, he was crooning on stage, carrying off the older Dev Anand numbers (or was it Shammi?) with aplomb, and doing a credible job of lip syncing his way through the newer songs whose words didn’t come as naturally. When the movies were released, he was probably setting up a steel plant somewhere to ensure he became India’s second largest domestic steelmaker (14.3 mn tonnes vs SAIL’s 15), perhaps he was even coming back from the foundation-stone laying ceremony for his new 10 mn tonne steel plant in the car with West Bengal chief minister Buddhadeb Bhattacharya in November 2009 when a Naxal bomb damaged one of the escort jeeps in the convoy—presence of mind, and a strict security drill, ensured the chief minister’s car didn’t stop to survey the damage, but just moved on. This time around, however, I expected Jindal to be singing a different tune.

Jairam Ramesh was giving all mining companies a tough time and, even though Jindal doesn’t have too many mines (his big grouse, ironically!), getting an environment clearance is an uphill task; the government seemed hell-bent on enacting a law to give tribals and locals a 26% profit share in all mines in their area; the Supreme Court rejected the Karnataka government’s decision to allocate an iron ore mine to Jindal even though it was part of his MoU with the state—the mine allocation said it was being given since the company was doing value addition in the state (Jindal hasn’t given up, and the company has filed a review petition).

Jindal, however, is made of sterner stuff. He looks dapper as ever and carries off his brown suit well, in his designer house in south Delhi’s tony Prithviraj Road, with the customary Hussain on the wall. We’ve advanced the tea since a meeting with a minister has been brought forward, but the cooks are trained enough for this not to faze them: along with the tea, we get some lovely small pakoras and a preparation of what looks like grilled paneer. Jindal studiously ignores the food, I don’t.

We talk of the Radia tapes, with no particular point being made, but quickly move on to the business of the day. The 26% proposal, Jindal is clear, is quite impractical. SAIL, I ask, will have to recast its entire business and make each mine into a separate profit centre, won’t it? Why doesn’t the government just increase the royalty on ore or coal and give it to the locals directly—today, the government earns around Rs 120 per tonne of iron ore mined (the companies earn around Rs 2,000!), around Rs 250 per tonne of coal and around Rs 7,500-8,000 per tonne of steel produced. Jindal doesn’t react to my point about whether export taxes should be put on iron ore and coal, but draws my attention to an article written by Chhattisgarh chief minister Raman Singh which argues India’s mineral wealth has to be used for the country. “The government,” Jindal says, “needs to come out with a policy to encourage value addition within the country.”

No one, Jindal says, is going to build steel plants in the country unless they get steel mines—his calculations suggest India needs a capacity of around 250 mn tpa in 20 years (up from around 60 at the moment). So why does Jindal produce steel without any mines, at least till the Ispat purchase? Being a new mill, he says, he gets 1,000 tonnes of steel per employee per year as compared to SAIL’s 100 and Tata’s 200 (Posco is 1,500 and Arcelor 1,000)—this ensures his manpower costs are the lowest per tonne of steel ($10 compared to SAIL’s $70) and allows him to absorb the higher cost of iron ore (Rs 3,000 per tonne as compared to Rs 1,000 for Tata Steel and SAIL).

Jindal’s plans to expand production, he says, are well on track—the expansion at Karnataka and at Ispat’s plant. As for the new plant in West Bengal, work on the township has begun, he says, and 3.5 million tonnes should be ready by December 2013, and the full 10 by December 2016. The Karnataka mine, he agrees, has been a setback, but he’s waiting to see what the government there does. Ever since the Bellary mine scandal came to the fore, the BJP’s stated policy has been that it will allot mines only to those who are adding value to the minerals—why should India export its precious ores to China which then makes money out of it, the party argues. I’m open to the idea of bidding, says Jindal—he has been, it appears, advocating this to the government but no firm view has been taken on this. Bidding, of course, is what Jindal did when it came to mining firm Sesa Goa, but lost out to Anil Agarwal in the bidding process—it was a sealed envelope bid, not the auction-style one where you could keep increasing your bid.

As part of his purchase of Ispat, Jindal has got two mines, one each of coking coal and iron ore, but they’re in the Naxal-affected part of Maharashtra. Jindal, however, is not too worried about that and is confident this will help him lower costs. Possibly even the Naxalites realise they need to have some businesses going in their areas, if only to extort money from them—the same reason why, even at the heart of the terrorism in Punjab, some factories managed to remain open throughout.

Won’t environment clearances be an issue, I ask. After all, rivals like Tata Steel haven’t been able to get the Kalinganagar plant going for years, and see what’s happening to Posco and Vedanta. Ever the optimist, Jindal doesn’t think too much of the problem—most modern steel mills, he says, are environment-friendly (the problem in Posco, he says, was with the mining and in getting the land). Jindal elaborates on how he goes around getting the local population on his side when it comes to acquiring land. In West Bengal, he says, they designed things in such a manner that none of the 700 families had to be relocated from their homes. The company offered land oustees the money the government asked it to—it was single-cropped area—but then gave the villagers an equal amount in terms of the shares in the company. “So when the plant comes up and its value goes up, they will share in the prosperity”. In Rajasthan, he says, the company wanted to do the same but the local government stepped in and asked the company to raise the price of the land, from Rs 50,000 per acre to Rs 6 lakh.

Jindal has no problem giving out the money, having figured out that the price of land is so small, it won’t even add up to one per cent of the capital cost of any project, a very small price to pay to get the local population on your side. Which is why it is so surprising to see so many plans in India getting derailed over land acquisition. As president of Assocham, Jindal went and met Tata, when the Singur agitation was going on, to make a suggestion. Why not double the price the state wants you to pay, he told Tata; it’ll make you a hero and won’t add more than a hundred crore or so to capex, certainly not a large sum compared to the losses that will be suffered due to dislocation of the plant. To show he puts his money where his mouth is, Jindal concludes, “we spend 2% of our profits on CSR already”, referring to one of the government’s proposals to get industry to give back more to society.

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