‘Impact of coal shortage on operations in Q2 was minimal’

JSPL managing director VR Sharma

For Jindal Steel and Power (JSPL), a rising demand for its products in global spot markets has driven its prices and profits in the September quarter. The company is also now extending its slurry pipeline to connect Kasia and planning to add another 3.5 million tonne per annum capacity at Angul, JSPL managing director VR Sharma said. In an interview with FE’s Rajesh Kurup, he also said that the company’s plans to acquire Reliance Naval and Engineering is not in a very active stage. Excerpts:

Due to the monsoons, the second quarter is generally a sluggish quarter for the industry. But JSPL’s net profit nearly tripled. Where did the growth come from?

The demand was very good, especially from the international spot market, and we exported more than 40% of our total produce. So, basically demand has driven the prices and profits.

The production rose to 3.94 million tonne per annum (mtpa) during the first half of this financial year from 3.5 mtpa recorded during the year-ago period, which was very good. Similarly, there has been an increase in sales to 3.75 mtpa from 3.49 mtpa. We could export a lot. It was a perfect balance between domestic and export markets.

Did the shortage of coal impact your operations in Q2?

The impact was minimal. There was uncertainty for about a week, but the government acted fast and now there is no shortage of coal. There was no blackout situation in the country. There was an overall energy shortage worldwide. India’s importing 240-250 million tonne of coal, and all of a sudden coal prices in global markets shot up. So the Indian buyers stopped importing it, which had put a pressure on domestic coal.

What’s the status of the 200-odd-km-long slurry pipeline JSPL was planning to build between Barbil and Angul?

We had clearance from Barbil to Angul, but we were waiting for the mines to become operational. Now we have got the Kasia mines, which we won through an open auction, and connectivity to this mine is a must. So, now we intend to connect Barbil to the Kasia mines. We have started working on the project and we expect to complete it in the next 12-14 months, latest by December.

On your earlier announced Rs 18,000-crore capex for the next three years?

We are adding an additional 3.5 mtpa capacity at Angul, Odisha, raising the total capacity to 9 mtpa. This would be completed by 2023. Angul plant is more lucrative due to its geographical location, as it is near to the ports, mines, iron ore and coal. We also have a land bank available at Angul. At Raigarh, we are not taking up any project at the moment. We intend to raise Rs 18,000 crore from internal accruals, as there are no plans to raise any debt.

On the outlook for steel?

I would say we are in a super-cycle, as the world is consuming a lot of steel. The remaining two quarters of this financial year would be good for steel manufacturers as we expect to maintain profitability at the first six months’ levels for the next two quarters.

The government is pushing the industry to produce more steel and wants the country’s steel production to rise up to 300 mtpa by 2030. So, each year we have to grow at least by 50-60 million tonne in the country. I think it is a big task and cannot be achieved through brownfield processes alone. So the government has to permit foreign direct investments in the steel sector and invite foreign players to set up shop here.

JSPL had submitted bids to acquire bankrupt Reliance Naval and Engineering? What’s the status?

The process is on but it’s not in a very active stage.