Resources and infra are two areas where
we need investment. We are dependent on imports, which amount to $600 b. In today's
world, technology and capital is available. We need to simplify investment
regime to get large investments
Anil Agarwal, Chairman of diversified resources major Vedanta Resources, still retains enough gumption to invest big in India, in spite of the searing slump in commodities and hurdles in getting regulatory approvals for mining. His Lanjigarh refinery in Odisha is working at a quarter of its production capacity and Chinese aluminium is killing the industry. However, he insists that his company is better-placed as it figures in the first quartile of production costs. He mentions a "few pinpricks", such as the delay in obtaining clearances and on retrospective taxes, and argues that “For Make in India, weneed to facilitate 'Find in India' and 'Mine in India'. In spite of the obstacles, his group is lining up . 20,500 crore of investments in Rajasthan in the next 3-5 years. Mr. Agarwal spoke to Ms. Rakhi Mazumdar and Mr. Satish John in a conference call from London, a day after he attended a meeting that top global CEOs had with Hon'ble Prime Minister Shri Narendra Modi during his visit to UK. Edited excerpts:
How did the meeting fare with the PM?
By and large
Britain had done everything possible to welcome the PM. On both sides it was a
huge delegation. It has been taken very well. While there were a few pinpricks
like the retrospective tax, delay in getting clearances etc. they welcomed
opening up of FDI in various sectors. The British PM, David Cameron, was around
all the time while the PM was in London. India's reassurance on retro tax was
well received. What is needed to boost FDI was also discussed. Vedanta has made
the highest FDI in India -$30 billion in 10 years -while on India's side, the
Tatas are the largest investor and employer in the UK.
You mentioned recently that the
government should be nimbler and faster in decision-making. Can you elaborate?
Two things come
to mind. We are a resource-based country. Resources and infrastructure are the
two areas where we need investment. We are dependent on imports, which amount
to around $600 billion. In today's world, technology and capital is available.
We need to simplify our investment regime to get large investments.India needs
10 companies like Vedanta in resources, oil & gas, iron ore, gold, etc. The
new MMDR Act is geared towards that. All we need is to have revenue sharing and
a policy of self-certification with heavy penalty in case of any wrongdoing. We
have to compare ourselves with China. We consume only 10% of what they do with
a similar population size. That indicates the kind of growth potential that
exists in India when we open up. For Make in India, we need to have `Find in
India' and `Mine in India'. Mining is the biggest employer in the long term.
Similarly, with the kind of infrastructure we have to build, there is huge
employment generation that is possible. A country of 1.25 billion people needs
to develop its own resources and infrastructure. Look at oil and gas. We do not
have global majors like Shell, ExxonMobil, or a Total here. But they are
present in Myanmar. While many buildings are coming up, we do not have proper
sewerage, highways, roads, or enough electricity.Overall, we need to simplify
things and also develop a sense of urgency to get things done.
How has the downturn in commodity
markets impacted resource majors like the Vedanta Group? Can you share details
about issues being faced in businesses like aluminium, zinc and oil & gas?
Prices have
fallen in the downturn. However, we are in the first quartile of the cost of
production curve. Also, we are in the process of reducing our cost of
production further. We are India-based, where consumption is good; we have a
balanced portfolio with aluminium, copper, zinc, iron ore and oil & gas.
I will go one
by one. Aluminium is a natural product for India, given our large reserves of
bauxite and coal. We should be able to be the lowest cost producer of
aluminium. That can create jobs and remove poverty. We should focus on
developing `semis' under Make in India since processing of aluminium can give
rise to hundreds of industries. For example, around 500 kg of aluminium goes
into each car, in components like die castings, radiators, etc. Aluminium can
boost Make in India in a big way. We have a large 3 million tonne (mt) capacity
in aluminium in India, which we are operating at 40% capacity now. We are
looking at getting bauxite to raise capacity utilisation. In zinc and lead and
silver, in which we are one of largest producers at Hindustan Zinc, we raised
capacity more than 10-fold in the last 12-13 years from 1.5 lakh tonne. In Goa,
iron ore mining resumed after a three-and-half-year shutdown. Two things are
hurting us. Prices have fallen to such an extent. We also expect the government
to abolish the 10% tax on exports of low-grade ore. The government should
provide more room for exploration. A liberal exploration policy will also
generate self-employment. We need ten times more than what we are doing today.
In oil & gas, ONGC produces 6 lakh barrels, we produce 3 lakh barrels which
we will enhance to 5 lakh barrels in both on shore and off shore at an
investment of $10 billion.
When do you see commodity cycles
changing course for a recovery in prices?
While in (case
of) iron and oil, prices may come up by 15-20%. However, it is likely to remain
at that level thereafter.
There have been very few greenfield
projects that are coming up in India. Why are industrialists hesitating from
investing in greenfield projects (like Lanjigarh)? What will give them
confidence?
It is true that
industry today has less courage for new sites. The interest rates are very high
and that makes projects unviable. I don't know the answer. The trend is nobody
has the mood or the zeal to start a new investment. After all, the existing one
has to run healthily. However, it is a question of time. Large capacities have
to come up in every sector, government has to get it either through public,
private or investment by multinational companies. In iron ore, for instance, we
have tremendous potential. We have the same geology as in Australia. While the
latter developed its iron ore and survived on it, we produce only 100 mt whereas
our capacity is to produce 600 mt.Once we get going, it won't take time to
reach that volume. However, in India, royalty and taxes are amongst the highest
in the world.
What is the status at Lanjigarh?
In Lanjigarh,
our refinery is at the base of the bauxite reserve. We are operating it at 25%
capacity. We are importing bauxite to run it, while we have given up our rights
to the mine which is now owned by Odisha Mining Corp and the Odisha government.
It has to be used sometime or the other. If it has to be used, we need the
consent of the people. Hopefully, we will get it sooner or later.
The Vedanta Group has lined up 20,500 crore in fresh investments in the next 3-5 years in Rajasthan. Do you
think it is the right time to invest there? You are also talking of investing
in potash.
We have already
invested in zinc and oil & gas business there. Apart from expanding our
capacity in zinc and oil, we also hope to develop fertilisers since they have
rock phosphate and we already produce sulphuric acid. The state has tremendous
resource potential in oil & gas, rock phosphate, potash and marble. In
marble, the potential is much more than even Italy which has large quarries
employing 10,000 people who cut and polish the stone at same site. As part of
Resurgent Rajasthan, the chief minister is calling on investors and has
received good response. The Centre has allowed states to do the mineral
auctions and it can be done for potash, limestone, marble and also gold of
which it has good reserves. In case of potash, we need $4-5 billion investment
since we import our entire requirement. The state will also benefit from a
liberal exploration policy.
Will you enlist a technology partner for the
fertiliser project?
We have not come to that stage yet. We
have people who run these businesses and work for us from the likes of Rio
Tinto, Anglo American, BHP and others, and can approach them in case we need to
take on a technology partner.
How big a problem is dumping of aluminium?
Some 55% of
aluminium coming into India is being dumped mainly by China. We need to have
safeguard duty in place soon and increase the import duty to protect the
domestic industry. In steel, 10% is being dumped and it already has a safeguard
duty.
By when do you expect the Cairn-Vedanta merger to
come through?
Some shareholders have
called for a review. Our vision is to create a fully merged natural resources
firm from India. We have moved in a transparent manner. The process is going on
and if anything is required, the bankers will recommend it. It should take
couple of months.
