The provision of a reduction in corporate tax to 15 percent should be extended to the steel industry.

VR Sharma, Managing Director, JSPL

“The government aims to achieve 300 million tonnes of crude steel output by 2030 and for that there is a need to give the necessary aid to the industry,”  says VR Sharma, Managing Director, JSPL. Excerpts from the interview…

How do you see the domestic demand for Rebar / TMT in the coming years & what will be the demand drivers?

The domestic demand will be quite good for the industry. There have been adverse impacts across industries during the past 6-8 months due to the pandemic. The movement through public transport was restricted. Indian Railways are also running at lower capacity utilization. We believe after the rollout of the vaccine, market sentiment will further improve. The movement through railways, airways, among other modes of transport will start for migrant workers. Also, we will see other businesses like hotels, entertainment, etc. commence operations in full swing.

What is the impact of the pandemic on the rebar industry, and what are the continuing challenges the industry is facing?

While the industry impacted, we managed to sail through a challenging period. We took a strategic call to operate our plants even during the lockdown, though at lower capacities. Also, we exported nearly 70 percent of our produce during that period, which helped us sail through the pandemic period. We demonstrated our resilience in these difficult times, and it paid off.

In the December 31, 2020 quarter we posted a 20 percent jump in standalone crude steel production at 19.3 lakh tonne and 12 percent growth in sales at 18.8 lakh tonne.

What is the overall production of rebar / TMT bars, and will the existing capacity be able to meet the expected demand for rebar for construction?

There are four major players (JSPL, RINL, Tata Steel, JSW Steel) which produce nearly 8 lakh tonne of TMT bars while the other producers like medium and small size plants cumulatively produce around 7 lakh tonnes of TMT bars.

The other producers are currently manufacturing only 3-4 lakh tonne capacity, which they need to ramp up. While the demand for TMT/ rebar is about 16 million tonnes per annum, the production is only
14 million tonnes per annum. There is a scope for all steel players to meet the rising demand.

What is your current production of rebar / TMT bars?

Current capacity is 2 lakh tonne per month.

Could you brief us on the technology used to produce the quenched and tempered bars?

Most players in the industry that produce quenched and tempered are almost at par. There are three categories in this. 1) the primary players 2) secondary yet prime players who have upgraded their mills to produce quality products and 3) local players. The prices of products go down from primary players to local players owing to the difference in quality.

How do you ensure the quality of raw material, especially scrap/billets or ingots?

We use virgin material for producing bars.

How do you look at the importance of a comprehensive financial policy to fund the core sector like steel to improve access to capital for setting up large production capacities?

There is no such financial policy in place at the moment. We have been making representations to the government for the past 7-8 months to set up a financial institution for the expansion of steel and other core sectors. The government aims to achieve 300 million tonnes of crude steel output by 2030 and for that there is a need to give the necessary aid to the industry. We have written to the government in this regard. We have also made a representation that the provision of a reduction in corporate tax to 15 percent should be extended to the steel industry especially for undertaking brownfield expansions. There is a possibility that to avail the benefits of reduction in corporate tax, companies might set up new firms. Instead, if the benefit is extended to brownfield expansions, it will benefit the industry.

What regulatory and policy reforms the government needs to bring in to ensure augmentation of capacity build-up?

The need is to be felt by the government and not the industry players. Companies don't need to increase the capacity unless the country needs that steel. Earlier, the banks also had a negative outlook for the steel industry. However, that has changed now as they have realized that there are serious players in the industry and the Indian banking system is taking steps in this direction as they are assured that the depositors' money is safe.

Has the advent of digital and disruptive technologies had any impact on the production process of TMT bars?

We have already reached level 2 of digitization. We are already digitally integrated for the past five years. All our processes are done through digital mode. The only place where digitization was not there for a long time was in sales. However, we have now even started that through the portal service.

Tell us about the range of rebar manufactured by your company and also tell us the unique features?

We were the only players in India to bring 550 grade TMT steel in the market, which is unique. Rest all the players still make up to 500-grade steel. But they are now following us. We manufacture them in our facilities in Jharkhand and Chhattisgarh with a capacity of 2 lakh tonne per month. With this capacity in place, we are well-positioned to meet the demand.

What is your outlook on the demand-supply for the 2021 and impact of price variation on the cost of production?

We expect the demand to outperform supply in 2021. The prices have increased but after March, we expect them to be stable or soften. This is largely because the government has asked NMDC to reduce iron ore prices. If that happens, the steel prices will reduce.

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