INDIA HAS ABUNDANT NATURAL RESOURCES; ALL IT NEEDS IS REFORM: ANIL AGARWAL

Interview of Mr. Anil Agarwal, Chairman – Vedanta Group
Published in Business Today, Issue: April 2014 

Billionaire industrialist Anil Agarwal has been facing a number of problems to expand his businesses in India. The government in January rejected environment approval to his Vedanta Group's proposed bauxite mining project in Odisha's Niyamgiri hills and has also been dragging its feet on allowing its Cairn India unit to expand its exploration activities. Still, Agarwal believes India has tremendous growth potential. In a conversation with Arunima Mishra at the India Today Conclave 2014, Agarwal says India must encourage mining and manufacturing to boost economic growth and hopes that the new government that will take charge after the General Election due in May will provide strong and decisive leadership. Edited excerpts:

Q. How does Vedanta plan to make the Lanjigarh aluminium plant in Odisha fully operational now that the government has rejected environment approval to bauxite mining in Niyamgiri hills?
A. It's a small thing [for Vedanta]? Not even a blade of grass has moved there as we have been talking about it for 10 years now... Aluminium is an important material for India. It's a material that can bring tremendous prosperity for India. If we produce aluminium it can provide employment to five crore people. We [Vedanta] have created a capacity of 30 lakh tonnes [but] we are running at 40 per cent capacity.
It [the Lanjigarh plant in Kalahandi district of Odisha] is a national asset and we expect our bauxite problems to be resolved... Late Biju Patnaik [former chief minister of Odisha] had one feeling in his heart that the stigma of Kalahandi can be eradicated only by setting up an industry there. We have set up that unit spending Rs 50,000 crore in Odisha. When I went there 10 years back, it was? worse than Andaman and Nicobar Islands. Today if you go, there's prosperity and the only industry there is our industry. It's a development model.

Q. So, what's your Plan B for the plant?
A. They [state-run Odisha Mining Corporation, a joint venture partner for bauxite mining] are doing whatever they can do. We are not interested in Niyamgiri. We need bauxite. We need our food.

Q. Do you think any corporate rivalry resulted in the no-mining status for Niyamgiri hills?
A. No. There has been no corporate rivalry... There's so much to be done in India [but] who has the courage to do it? We need more industry people to come forward and do it.

Q. There's speculation Cairn India would be merged with Sesa Sterlite. Is it true?
A. There's no [such] plan at the moment.

Q. Is there any update on the government's decision to sell its residual stake in Hindustan Zinc and Bharat Aluminium Company?
A. The status is same. We have created tremendous value... The government has all the inclination to give us the [remaining] share. It's a model that is a win-win situation where the government value of Rs 500 crore has gone over Rs 15,000 crore. So, it shows this model created value. It's very important that the government takes the view and moves forward.

Q. Are Vedanta's mining projects running the way you wanted them to be?
A. Our mining projects are not running the way we wanted. We want a reformation to take place in the oil sector. Cairn India has given Rs 24,000 crore as royalty and taxes, which is the highest in the corporate sphere. These are the priority sectors... the government is working with us. We want more production to take place.

Q. How acute is the energy security problem in India?
A. We have abundant amount of these resources [oil, gas and coal]. We are spending almost $200 billion on [importing] these. These can all be produced in India. Let world-class people come and develop our resources that can be used to generate electricity. India has abundant natural resources. All it needs is reform.

Q. What reform measures do you suggest the government should take?
A. Two things. First, our natural resources ' we must produce 50 per cent of gas and oil in India. Auction the natural resources in a transparent manner just like the 2G [second-generation telecom] spectrum auction has been done. The government will get funds, things will get faster. The whole world will be confident that they can come and invest in India.

Second, the reform agenda should be selling majority stakes in public-sector companies. It will be like America where all corporations are run by a CEO and the owner is a shareholder who can pull up the management. All these companies will be 10 times bigger and they can employ seven to eight crore people in the public sector when there's an independent CEO, not a government official... If the petroleum and mines ministries undertake reform in a simple manner, huge employment will be generated, tremendous growth will take place and huge investment will come. It will be transparent and it will be governance-oriented. New airports and telecom companies are running like that.

Q. What are your expectations from the new government?
A. It is very important to eradicate poverty and create jobs. One of the biggest things that can be done to create jobs is to boost manufacturing and develop our natural resources. Maximum employment can take place in the mining sector or processing those minerals and in manufacturing. I would like to see strong leadership in governance.

Q. What's your view on the Bharatiya Janata Party's prime ministerial candidate Narendra Modi as he too talks a lot about manufacturing and business?
A. We are out of politics. We are like a bird and we will go anywhere.

KING OF PERFECT TAKEOVERS

Vedanta Group Chairman - Anil Agarwal explains his company’s $ 20 bn investment in India

MAIL TODAY, DELHI EDITION - 16th MARCH 2014








SI VIS pacem, para bellum, which is Latin for if you want peace, prepare for war, is so apt for Vedanta Resources Plc chairman Anil Agarwal’s mindset. Agarwal is constantly scaling up, fortifying himself locally and globally to stay one step ahead of the eight ball. Agarwal’s rise coincides with the disinvestment of Balco during the NDA administration in 2001.

One could liken him to a hunter who goes after the predefined quarry.

His code predicated on an acquisitive strategy, much akin to Lakshmi Mittal’s a decade earlier.

Mittal remained true to his core competence as he acquired steel plants and turned them around with the help of ex- Steel Authority professionals till he made the big leap when he acquired Arcelor. For most part, the 59- year- old Agarwal has followed a route less traveled for an Indian industrialist. A first generation entrepreneur, truly a child of India’s disinvestment programme, he has managed to pouch Balco and Hindustan Zinc and bulked up in next to no time.

Hard wired to be a risk taker, the metals magnate has kept a war chest of Rs 21,637 crore ready to buy residual shareholding in both Balco and HZL.

BEGINNINGS
Over the years, as a journeyman, I have managed to interface with most Indian business tycoons – big and small – but I hadn’t had a close encounter with Agarwal. So when Agarwal says that raising the first Rs 25 lakh was the biggest challenge, you wake up, smell the coffee and say – ‘ hey, this guy still has his feet planted firmly on terra firma.’ Agarwal said, “ Sitting in Manipal waiting for the Syndicate Bank manager to give the cheque for Rs 25 lakh in 1977 was the biggest baby step. Equally, hiring my first manager was important. Now, when I think of those days, I smile to myself.” Agarwal’s acumen for a shrewd buy is standing him in good stead. In the recent past, he has pouched Sesa Goa and Cairn Energy India. By acquiring mass, he has surely but slowly grown his business swathe with revenues in excess of $ 15 billion and profit after tax of $ 2.1 billion. Ask him the secret of his success and he will turn around and tell you that he is a product of the P V Narasimha Rao’s unfettering of Indian economy age, but he actually got toe to toe to eyeball Indian biggies during the Vajpayee administration.

Loathe to talking too much, initially it was difficult to elicit responses from him. But as he warmed up to the conversation, he began to describe his journey from a scrap dealer in Bihar to the one of the toniest parts of London - Mayfair. He said, “ I started out with 10 employees, now we have a family of 250,000 people working for us. We pay taxes to the tune of Rs 6,000 crore annually to the Govt of India. After taking over Cairn India, we have paid Rs 24,000 crore as taxes and royalty to the government. This is most satisfying, for unarguably, we would be one of the biggest private sector partners with the government.” Agarwal is clear that manufacturing is the only way out for a moribund India if it needs to provide employment to its conveyor belt of youth. And for that, India needs to leverage its natural resources.

Agarwal remains India- centric for some of his biggest assets are in the country. According to him, as a diversified conglomerate with interests in oil, gas, aluminium, copper, silver, zinc, bauxite, he reckons that he can add value through his investments in India and Africa where there is significant headroom and upside available. Pragmatic to the core, he says, “ I come from Bihar where I grew up and studied in Miller High School, I went to Mumbai looking for a future and a fortune, I stayed at the Oberoi using it as a business address, but ate out and then went off to London 15 years ago.” He claims that he relocated to London simply because “ nobody was taking me seriously in India.” London has given him a vantage point it has given him the necessary edge and ability to raise capital to funnel into his new businesses.

ACQUISITIONS

Using that as the whetstone, he has emerged as a merger and acquisition specialist. With old ally Tarun Jain ( chief financial officer for the group) by his side, Agarwal has gradually acquired business after business. But, he believes this hasn’t changed anything because the operating credo isn’t greed. He believes the India story is still intact, but India has to decide on what it wants to do, “ We cannot continue to import our energy requirements, we have to become self reliant. The key to everything is simplification – a combination of tendering/ auction and privatisation is the way forward for India. We have to dismantle archaic laws and ossified apparatuses. Who would have believed that Delhi will have an airport of this class and size? You have to involve the private sector to work in conjunction with the Govt. It is the only way out.” A votary of auctioning of precious natural resources, he feels revenue sharing with the government as a partner in progress is the most credible mechanism to rid India of its sloth. Giving the example of importing all our copper and now even coal, he argues that large dosage of capital can revolutionize the way we mine. The bedrock has to be a free, fair and transparent auction – we don’t want an approval process, rather India needs a self declaration process.

Doing business in India should be made taqleef ( problem) proof.

With $ 20 billion invested in India, the $ 70 billion strong Vedanta ( group market capitalisation) is putting his money where his mouth is. Of this Agarwal has raised $ 15 billion in foreign capital, other than for M& A. Knowing full well that investments in India are fraught with danger – Lanjigarh and Niyamgiri in Odisha – bear testimony ( government has rejected mining here as recently as January 2014 after 12 tribal groups refused to green light the same) to that fact, Agarwal who has sunk in Rs 50,000 crore in the state is still willing to punt on India. Equally, his recent consolidation exercise resulting in the creation of mining major Sesa Sterlite suffering due to suspension of iron ore mining in Karnataka and Goa has consolidated gross debt of Rs 84,063 crore as of September, 2013.

Despite these setbacks, his understanding is that you need to make money from business in order to reinvest. As he says, “ Government cannot change the goalposts it has to offer a level playing field to both the private and public sector. Our goal has to be narrow focused – eradicate poverty at all costs – by using the country’s mineral resources.”

VEDANTA KHUSHI - TRANSFORMING LIVES

In Vedanta Anganwadi Centers, the Group supplements morning breakfast, with poha and groundnut, providing clean drinking water, new utensils, colorful books, toys and other necessary items, much to the needs of these children.
Improvement in attendance & retention of children and a significant progress in their health & hygiene is apparent in health check-ups & weight measurement of these children which is carried out periodically. The teaching through play-way method has been another significant factor responsible for increase in attendance.

Children are groomed for about 3 years in Vedanta Anganwadi Centres and they learn good habits, etiquette, discipline, importance of health & hygiene and basic education.