Odisha eyes high
accruals from mines to fund social sector
Odisha, the largest producer of iron ore in the country,
is planning to earn huge revenues from the auction of mines. The mine auction
exercise, the state government hopes, would fetch it several thousand crore
rupees over a period of time and help finance some its own ongoing social
sector programmes that have proved high-yielding electoral tools.
The Opposition, however, is not happy with the state
government’s decision saying the latter must think some out-of-box solutions to
augment its resources instead of exhausting the precious mineral wealth.
In the first phase, the state government has invited
financial and technical bids to grant mining leases (ML) for 10 iron ore and
manganese blocks.
The Union government had recently approved the
revision in mining lease area limits for iron ore and associated minerals in
Odisha to 58 square kilometres (sq km), up from 10 sq km prescribed in Section
6 (1) (b) of the Mines and Minerals-Development & Regulation (MMDR) Act.
In fact, the state had kept the auctions of iron and
manganese ore in abeyance for want of clearance from the Centre.
Sources in the state mines department said seven of
the mineral blocks on offer are pure iron ore deposits. The remaining three
have iron ore and manganese ore reserves.
Similarly, five out of the 10 enlisted blocks have
been reserved for specified end use--Thakurani, Jaribahal, Roida-II,
Narayanposhi and Ganua. The specified end use is still hazy as it is unclear
how many blocks would be made available for large, integrated steel
manufacturers and secondary steel producers like sponge iron, pellet and pig
iron makers.
Since the state government has already decided to
include secondary steel plants as specified end use, online auctions of iron
ore are expected to elicit intense bidding.
Auctions are to be hosted on MSTC’s online platform.
The state government has invited financial and technical bids both in physical
and digital formats. The deadline for purchase of tender documents is November
15. Bidders can submit their bids up to November 18, a notification by Odisha’s
steel and mines department said.
In the next phase, the state is expected to float
notice inviting tenders and model tender documents for 10 more blocks.
Though specific figures on expected revenue earning
from the proposed auction process is not available, sources informed that it
would receive huge sums that would be enough to fund state housing, healthcare,
primary education and infrastructure development projects.
The Opposition BJP and Congress have been complaining
about the state’s failure in funding Centrally sponsored programme and special
vehicle projects like 289-km Khurda-Balangir railway line.
The Odisha government is yet to hand over around 3,000
acres of land to the Railways for the ongoing Khurda-Balangir railway line
project. Most of these land patches are private and forest land which the state
government has failed to acquire and hand over to the Railways.
The state government has sanctioned `159 crore only
towards land acquisition compensation for Dasapalla-Balangir segment.
According to analysts, once the mining revenue starts
flowing into the state coffers, it can make higher budgetary allocation for
projects like Khurda-Balangir railway and expand size of the food security,
healthcare and primary education programmes to hold onto its consolidated
votebank.
Pradesh Congress Committee president Niranjan Patnaik,
who is also a former industry minister and whose family members have links with
mining businesses, has advised chief minister Naveen Patnaik to keep 70 per
cent of mines in the state under its administrative control instead of leasing
them out to private firms.
“If the state government does not bring the majority
of mines under its control, future of the state will be dark because it will
act as an impediment in attracting large-scale industries to the province. “If
CM Naveen Patnaik wants more steel plants to be set up in Odisha, he should
ideally ensure that 70 per cent mines are under the control of state
government,” said the OPCC chief.
Citing that the Odisha received the highest revenue
from mines, the veteran Congress leader suggested setting up of another
state-owned corporation like Odisha Mining Corporation (OMC) to ensure its
better functioning.
Asian Age
Govt considering to
have larger blocks to attract investments: Minister Pralhad Joshi
The Ministry of Coal is looking at ways to attract
foreign participation in the coal mining sector. One of the options being
considered is carving out larger coal blocks to meet the requirements of
foreign investors, Coal and Mines Minister Pralhad Joshi said.
Speaking at the third India Energy Forum by CERAWeek,
Joshi said, “We have opened up the coal mining sector for Foreign Direct
Investment under the automatic route. We are formulating various policies to
attract foreign investors and private sector within the country.”
Policy soon
The Ministry of Coal has been evaluating a slew of
measures of attract more investment in the coal mining sector. This includes
commercial coal mining, allowing auction of mines with less than three bidders,
and permitting the sale of 25 per cent coal committed production in the open
market.
“The current size of coal blocks is very small today,
and to attract global investors, we need bigger blocks. We are deliberating all
such such things, and within a fortnight or a month, we will come out with a
policy for the same,” Joshi said.
“The FDI proposal has been approved and on track. Now
within the Coal Ministry we need to make some changes to attract investors...A
proposal for the same which is yet to be finalised, and needs the approval of
the Cabinet and the Prime Minister,” Joshi said.
Speaking to reporters at the sidelines of the event,
he said that a Cabinet note may not be needed for this change, and that the
Coal Ministry is acting on industry suggestions to boost commercial coal
mining.
Poor response
The recent round of coal mine auctions saw a poor
response with just 6 of the 27 blocks on offer getting adequate interest to be
bid out. One of the reasons for this disinterest could be expectations from
commercial coal mining, the auctions for which are expected to begin from
December 2019.
India’s energy needs
Commenting on the way ahead for India’s energy demand,
Minister for Petroleum and Natural Gas Dharmendra Pradhan said, “Given its huge
energy appetite, India will be the key driver of global energy demand in the
coming decades. In fact, it will experience the fastest growth in energy
consumption among all large economies. To meet this demand, India would need a
healthy mix of all commercially viable energy sources.”
“The share of renewables in electricity capacity has
significantly gone up to 22 per cent from around 10 per cent in 2014-2015.
Secondly, the ethanol-blending percentage has risen from 0.67 per cent in
2012-2013 to close to 6 per cent now. Finally, more than 95 per cent households
now have access to LPG, making their kitchens smoke-free,” Pradhan added.
However, India will remain dependent on coal for a
large chunk of power generation. Piyush Goyal, Minister of Railways and
Commerce and Industry, said, “All over the world, coal was the primary driver
of energy needs, particularly low-cost energy, during the development cycle of
different nations. The United States, Europe, China, Russia, all have used coal
extensively to meet their development abilities. They wouldn’t have reached
where they are today, had they not used that much coal. Even today, our per
capita consumption of coal is probably one-seventh or one-tenth of what it is
today in the US.”
“Even in absolute terms, they (US) consumes nearly
twice as much coal as India consumes even today,” he added.
“This debate about coal needs to be restated. It
doesn’t matter whether you produce energy from coal, gas or petroleum, one
should only be concerned about the emissions. And if you are able to reduce emissions
while producing electricity from coal, then coal is as good as anything,” RK
Singh, Minister of State (Independent Charge) of Power and New and Renewable
Energy, said. “We have laid down very stringent norms for emissions from power
plants,” Singh added.
HBL
Essar Steel CoC
defends lower pay out to Standard Chartered Bank
The
Committee of Creditors of Essar
Steel on Tuesday defended lower pay out to Standard Chartered Bank (StanChart) despite it being a
secured financial creditor, reasoning that its security was different and lower
from other lenders of the debt-laden steel maker.
Challenging the National
Company Law Appellate Tribunal’s (NCLAT) decision allowing higher payout to
Operational Creditors (OCs), the CoC told the Supreme Court (SC) that there had
to be difference between the money distributed as the OC would continue to be
working with the new resolution applicant which takes over.
The submissions by CoC came during the hearing on a bunch of pleas challenging
the NCLAT approval
of ArcelorMittal’s plan for Essar Steel, the higher payout to OCs and
StanChart, as well as other petition by OCs challenging the amendments made to
the Insolvency and Bankruptcy Code. The court will continue hearing the case on
Wednesday.
The CoC has challenged
higher payout to StanChart and
OCs, which have opposed the latest IBC amendments giving preference to
financial creditors over operational ones. Other changes made to the IBC, such
as the extension of the corporate insolvency resolution period to 330 days from
270 days, have also been challenged before the court.
During a hearing in August,
the SC had observed that if the law allowed banks to decide that while they
would take haircuts, they could give nothing to the operational creditor, “it
was bad law”.
“If this is not addressed
even in the amendments, it is a major lacuna. The amendments, instead of
addressing the issue, aggravate it,” the court had then said. The financial
creditors to Essar Steel had then tried to justify the latest
amendments made to the IBC by claiming that the difference between them and the
OCs was that they were secured lenders as opposed to the latter. The court had,
however, observed that as there was “no monopoly” of any operational creditor,
it was possible that a new management could switch to another service provider
instead of the old one.
BS
India to chart its
own course of energy transition: Dharmendra Pradhan
: India will chart its own course of energy transition
in a responsible manner even as it is said to be a key driver of global energy
demand in coming decades, Oil Minister Dharmendra Pradhan said on Tuesday. As
the world battles alarming rates of carbon emission threatening the
environment?, countries around the globe face pressure to reduce hydrocarbon
use and switch to greener sources such as renewable power and electric
vehicles. Speaking at a ministerial dialogue at India Energy Forum by CERAWeek,
Pradhan said India is the third largest energy consumer in the world in
absolute terms after the US and China. However, per capita energy consumption
in India is only about one-third of the world's average. "This makes it
imperative to ensure energy justice to all, which essentially means access to
energy in an affordable and sustainable manner," he said. Given its huge
energy appetite and growth potential, India will be the key driver of global
energy demand in the coming decades, he said. "In fact, it will experience
the fastest growth in energy consumption among all large economies. To meet
this huge demand, India would need a healthy mix of all commercially viable
energy sources." No single source can meet the energy demand, he said.
"India will chart its own course of energy transition in a responsible
manner and would greatly influence global energy transition," he said.
Energy sector, he said, will be fuelling India's journey towards the goal of a
USD 5-trillion economy. Giving a glimpse of India's path of energy transition,
Pradhan said the share of renewable in electricity capacity has significantly
gone up now to 22 per cent from around 10 per cent in 2014-15. Also, the
ethanol blending percentage in petrol has risen from 0.67 per cent in 2012-13
to close to 6 per cent now. "Finally more than 95 per cent households now
have access to LPG, making their kitchens smoke free," he said. "We
are preparing for a low-carbon energy future underpinned by our government's
aim to set up 450 GW of renewable energy capacity by 2030. As the penetration
of variable renewable energy grows in the mix, it will be important for us to
consider back-up, dispatchable generation sources in our national electricity
plan," he said. Natural gas, he said, offers an option of a balancing
fuel. It "has proven capability to compliment renewables." Similarly,
the fuels of the future will have the greatest impact in choices for transport
where several fuels will be in play, both in absolute and hybrid ways. This
preferred spectrum of transportation fuel would be comprised of conventional
hydrocarbon, LNG, CNG and electric energy, he said. LNG as a transportation
fuel for the long haul and heavy-duty transport like Railways offers tremendous
potential, he added. "Today there are proven technologies to use coal in a
cleaner and more sustainable way. We are setting up a fertiliser plants in
Odisha which would be first of its kind in terms of using coal gasification
technology. We also have technologies to extract coal bed methane," he
said. Energy has become an essential commodity in bilateral trade engagements
with several key trading partners and in positioning India as an important
strategic player in global energy landscape, he added.
Source: ET
China to push
global steel demand this year: World Steel Association
The World Steel Association has revised its 2019
Short-Range Outlook (SRO) for steel demand higher on Monday on the back of
strong Chinese demand. The Brussels based Worldsteel provided an updated SRO at
its General Assembly in Monterrey, Mexico, and forecast global steel demand to
grow by 3.9% to 1.775 billion tonnes, compared to an earlier forecast of 1.3%
or 1.735 billion tonnes in April. As per the new estimates, global steel demand
is expected to grow by another 1.7% in 2020 to 1.805 billion tonnes with higher
contribution expected from emerging and developing economies, excluding China.
Global steel demand, driven by China, is expected to see 7.8% growth to 900.1
million mt in 2019. The rest of the world is expected to record 0.2% growth to
874.9 million mt. Commenting on the outlook, Al Remeithi, Chairman of the
Worldsteel Economics Committee said: "The current SRO suggests that global
steel demand will continue to grow in 2019, more than we expected in these
challenging times, mainly due to China." In the rest of the world, steel
demand slowed in 2019 as uncertainty, trade tensions and geopolitical issues
weighed on investment and trade. Manufacturing, particularly the auto industry,
has performed poorly contracting in many countries. However in construction,
despite some slowing, positive momentum has been maintained, the official
added. "While the global economic outlook is highly unpredictable, we
expect to see further growth in steel demand in 2020 of 1.7%, with emerging and
developing economies excluding China contributing more," the statement
from Worldsteel said.
Source: ET
India readies
policy to attract foreign investment in coal mining
India expects to have formulated a policy within the
next two weeks to attract foreign investment to its coal mining industry, the
country's Coal Minister Pralhad Joshi said on Tuesday.
Sources told Reuters last month that the country
planned to invite bids for coal mining blocks by the end of 2019. It is also
creating a coal price index as part of plans to open the sector to outside
investment.
"We are formulating various policies within the
coal ministry to attract foreign investment. Hopefully within a fortnight or a
month's time we will come out with a policy," Joshi said at the India
Energy Forum by CERAWeek.
India's recently concluded thermal coal mine auctions
received a tepid response, with 15 out of 21 attracting fewer than three
bidders. An industry source told Reuters none of 6 coking coal blocks received
interest from at least 3 bidders, the minimum required for a mine to be
allocated.
BJP aims at increasing footprint in Kolkata and
surrounding districts
Joshi said the government was looking to make
investing in coal mines more attractive to bidders.
"We have several small blocks which usually don't
attract foreign investment. For that we need bigger blocks."
Joshi said he expects India's coal demand to rise more
than 21% from current levels to 1.2 billion tonnes in 2023, adding that coal
would be necessary for the next three decades.
Moneycontrol
With a stay in
Bhushan Power & Steel-buy, JSW Steel gets a much-needed breather, and
clarity
On October 14, the National Company Law Appellate
Tribunal stayed JSW Steel from paying for the acquisition of Bhushan Power
& Steel, which is undergoing insolvency proceedings.
This basically delays the process, and adds a few more
months before JSW Steel can take the keys of Bhushan Power & Steel. It was
on September 5, that the National Company Law Tribunal had approved the Rs
19,700-crore acquisition.
A setback? Not really. Actually, it is a relief.
And that is because of two things. One, this gives the
steelmaker some more time during which it hopes the economic climate will
improve, with higher prices and demand for its products.
JSW Steel's production in the second quarter dropped
by 8 percent from a year earlier, to 3.84 million tons. For the six months of
the financial year, the numbers fell by 3 percent to 8.08 million tons.
A change in the economic circumstances for the worse
makes it even more difficult for the acquirer to turnaround an acquisition. JSW
Steel plans to nearly double Bhushan Power & Steel's present capacity of
2.75 million tons, in the next five years.
But to be able to do it, JSW Steel would need enough
capital to invest in Bhushan Power & Steel's units. But capital outlay
won't be easy, especially with profits falling 56 percent in the first quarter,
and the second quarter looking similarly dismal.
So extra time -
even of a few months - at this juncture,will help the steelmaker, which will be
hoping that the demand will pick up during the second half of the year.
The judgement
The stay from the Appellate Tribunal also takes care
of a major concern of the company.
The enforcement agencies had been on the heels of the
erstwhile promoters of Bhushan Power & Steel on allegations of money
laundering. This led to fears that JSW Steel may be liable for any future
litigation. The steelmaker had thus approached the courts for relief from
immediate payment, which was to be done within 30 days of the September 5
announcement.
And when the Enforcement Directorate, on October 12,
said it has attached assets worth over Rs 4,025 crore of Bhushan Power and
Steel Limited, there were immediate questions on the viability of the
acquisition, and if the bid amount stands.
A breather has now come in the form of the NCLAT order
on October 14.
The Tribunal said: "ED while conducting
investigation under PMLA is free to deal with or attach the personal assets of
the erstwhile promoters ... not the assets of the corporate debtor which have
been financed by creditors and acquired by a bona fide third party resolution
applicant..."
The tribunal also prevented the ED from attaching
Bhushan Power & Steel's assets.
"Yes, the decks are clear," said an industry
analyst. "All hurdles are taken care of. A formal announcement of JSW
Steel taking over Bhushan Power & Steel may come as early as
December," added the analyst.
Promoter repays loan
In a separate development, JSW Steel promoters have
repaid Rs 1,200 crore worth loan by releasing JSW Steel and JSW Energy pledged
shares of combined Rs 2,500 crore.
It released 7.01 crore shares of JSW Steel,
representing 2.90 percent of the share capital; and 11.88 crore JSW Energy
shares, equal to 7.24 percent of the
share capital.
In September, JSW Steel promoters had repaid Rs
1,148.59 crore, to release 5.07 crore of pledged shares.
Moneycontrol
Structurally the
steel industry is in a better position than two years ago: Tata Steel MD
T V Narendran, MD, Tata Steel
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RELATED
T V Narendran, CEO and Managing Director, Tata Steel is on a mission
mode to transform the 112-year old company. He is not only deleveraging the
existing core businesses to make it financially stronger, but Narendran is also
planting seeds for new businesses to ensure future growth. But with challenges
like declining steel prices, struggling units in Europe, climbing debt levels
and cheaper imports, the Tata Steel chief has his task cut out. In a
conversation with BusinessLine, Narendran explains how he plans to
navigate through these hurdles to achieve his target.
How do you compare the ongoing stress
in the steel sector compared to the down cycle in 2016-17
I am less negative or more optimistic because structurally we were in a
better place than we were in 2016-17. At that time the big problem was China
doubling its exports from 5 million tonnes to 10 million tonnes. Today that is
not happening. China is still exporting 5 million tonnes-- steel consumption in
China's domestic market has grown 10 per cent over the last six months. China
has taken many things in the previous 3-4 years to cut down inefficient
capacity and cut down polluting capacity. The more prominent companies have got
bigger, which is suitable for the global steel industry because the bigger guys
are more disciplined than a large number of small players.
Structurally
the steel industry is in a better place to what it was in 2016-17. There you
had China disrupting global markets today you don’t have China disrupting
global markets, today the problem is more about macroeconomic sentiment across
geographies which are having its impact on steel. Secondly, look at India
itself and South -East Asia. Who sets the price in South East Asia? It's not
China its India, because Indian exporters, including Tata Steel, are selling
into Vietnam and other areas. We are in some sense setting the prices because
the Indian companies are structurally in a stronger position than most other
companies. We have the scale, raw material, we have the latest plants here, so
efficiencies are good. Companies like JSW, Tata Steel --can be competitive in
the international market.
How do you see this playing out in
India?
In India, the industry has consolidated quite
a bit’. There won't be many people queuing up to invest much money in this
industry other than some foreign investors like---Arcelor Mittal. The demand
for steel will grow faster than supply. If you look at big steel consumers,
yes, the auto sector is facing some headwinds now, but Indian cannot be a
country consuming just 3 million cars. As the infrastructure gets built, more
and more parts of the country gets included, how do you travel around in places
where there no public transport. On the construction side, the government is
realising that infrastructure is the best way to kick start the economy.
Private equity is coming into commercial construction. In the residential
segment, there is a lot of action around the affordable housing category.
Are you on track to hit 30 million tonne
capacity by 2025?
We are pretty much on track. The acquisition
of Bhushan Steel with a capacity of 5 million tonne and expansion at
Kalinganagar by 5 million tonnes is anyway happening so we will hit 24 million
by 2022. Then it is a question of the steel market; if it continues like this,
later we will revisit, but I don’t believe it will stay like this for that
long. It will pick up soon. We have two options one is to expand our existing
sites or through inorganic growth. We can go to 35-40 million in existing three
sites--we don’t need to acquire any flat products facility. We could look at
smaller assets to beef up long products at a later stage. Right now, we will
focus on integration and -turning around. Bhushan steel is already turned
around quite a bit and Usha Martin also by the next year will start seeing
positive results. Our focus is now to deleverage.
Asset sale in Europe and South East Asia
were part of your deleverage plans which did not go through. How does that
impact your target to reduce debt?
We put in a lot of effort in Europe for the
last few years, but we were quite disappointed that the commission did not see
our point of view. The focus for us in Europe is how can we make cash positive.
We are also looking at how to optimise capex. So the challenge to our team
there is if you are cash positive, then you are no longer dependent on India
for any support --you are sustainable on your own. We are closer to it happening
than ever before. If the market were not so bad we would have achieved, it but
now it may take more time. India has to generate extra cash flows to
deleverage, and Europe has to ensure that it doesn't ask India for any money.
In South-East Asia, we want to exit. So we should close the transaction to sell
our unit in Thailand. We have already signed an MoU, and hopefully, in the next
month or two, that transaction will close. Then we still have the Singapore
unit for which we have received interest from buyers.
Will you look at bidding for iron ore
mines that are coming out for re-auction?
Yes, we would be. We are also considering
getting into merchant mining at some point of time because we have 100 years of
mining experience.
How has your experience been with IBC?
Now with the recent amendment has brought a
lot of clarity. The only part which we have been representing is that if there
is any action against the old promoters, then the new owners should be
insulated. The govt is trying to address that. But some of the cases are taking
too long. The steel business is cyclical, so the value two years ago may not be
the same today.
Will you continue to acquire through
IBC?
We don’t have any major plans. From a flat
product point of view, we are comfortable now. In the long products, we will
see as and when we require we will acquire.
The debt to EBITDA ratio is now over 4.
Is there a worry?
We have been on the investment mode, and ours
is a cyclical business. But still, Tata Steel reported Rs 30,000 crore EBITDA
and Rs 10,000 profit after tax. But we understand the concerns, but sometimes
panic is more than required. The enterprise value of Tata steel today is around
Rs 1,35,000 crores. We want to bring down the debt to EBITDA to under 3. If the
steel prices had been stable, we would have gone below 3 by the end of this
year. But steel prices are Rs 10,000 lower than what it was last year. Cycles
have become shorter. Earlier if the price went up, it remained up for three
years. Now within the year, it goes up and down multiple years. Our job is to
make sure we are the last man standing from a cost position. Tata Steel in
India business is in a solid place. Europe is where the challenge is.
How are your retail and other non-core
businesses shaping up?
The retail business is living up to its
expectations. Currently, we are selling 8,000 steel doors a month, and we would
like to sell 30,000 entries. The journey has taken us slightly longer than we
thought simply because it a very customer-centric business and the supply chain
was not stable. Now when the supply chain is stable, the orders need to be
chased. There is a vast potential in this business. We have also developed
windows and furniture. The business now is in a few hundred crores, and it will
grow rapidly. We are planting seeds for the future. One seed is the service and
solution, the other is our new materials business where we are working with
graphene. For example, we are working with Railways to coat inside of coaches
with graphene. We have set a target to get 10% of our revenues from new
materials. Third, we are expanding into the steel recycling business. We are
setting up our next centre in North that will come up next year--near Delhi. We
are setting up scrapyards in all regions. Another new area is using technology,
R&D in different areas. For example, we are looking at how can we use the
poor quality raw material to make good quality steel. We are also betting on
online commerce for our products. We have an online site called Aashiyana which
sold products worth Rs 100 crore this year, and we are targeting Rs 300 crore.
We are hoping that these businesses will account for 30 per cent of our
turnover in the next 5 years up from 10 per cent now.
How do you see the regional free trade
agreement -RCEP - conversations impacting the steel industry?
The steel industry should be kept out of RCEP.
Today the most significant imports into India are not from China. Seventy per
cent of imports are coming from Japan and Korea. Our fundamental point is India
is a growing market for steel, and if anyone wants to participate in this
market they should come and invest in India, create jobs in India, build steel
plants in India. Why do you want somebody to borrow money at low cost and build
some plant somewhere and just shift stuff into India? We feel that we should
not blindly follow these theories because East Asian countries didn't have a
domestic market; they have no choice but to export. For example, in the auto
industry, if India had a zero input duty on the car, I don’t think there would
have an auto industry in India. We should build a similar story for steel - we
have the raw materials, steel industry creates jobs, we create economic
activity. The argument that countries which have no raw material should make
steel and export, while India, with all these raw material and domestic market
is not trying to create an industry, is flawed. We are the second-largest
producer of steel in the world; we can’t be the second largest if we were not
good at making steel.
Source HBL
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