Jindal stainless steel is the biggest producer of the metal in India. But it faces a steep competition from international producers. In an interview with BE's Kishore Kumar Biswas, Abhyuday Jindal, MD, Jindal Industries Ltd. points out the ins and outs of the industry.
Q. What is the overall position of the stainless steel industry in India?
A. Stainless steel is the fastest growing metal with an expected growth rate of 9% annually in India and 5% globally. India is the world’s second largest producer and consumer of stainless steel. Indian stainless steel consumption was around 3.2 MT in 2017. With a melt production capacity of 1.6 MT, Jindal Stainless’ share in the organised Indian stainless steel market is over 50%.
The growth of stainless steel in India is expected to remain robust even in future, considering its immense potential in the Indian economy. The per capita consumption of stainless steel in India is ~2 kg, compared to the world average of ~6 kg. As a metal, it outshines all its alternatives, for its high strength-to-weight ratio, thermal fatigue endurance, superior crash resistance, lower life-cycle cost, nearly 100% recyclability, and exceptional aesthetics.
Q. Why are you expanding in the eastern India during such hard times? Have you got any special privilege in the form of tax holiday or other tax concession or in any form?
A. The eastern region exhibits strong demand from the consumer durables and kitchenware segments. While the national annual growth rate for this segment is pegged at 7%, it has grown at about 3.5% in eastern India. The availability of stainless steel in this region has been a challenge as this part of the country has not witnessed downstream expansion of stainless steel. Therein lies the opportunity to expand. We’re making deeper inroads in the region by installing dedicated capacities in our Jajpur plant to cater to kitchenware, using the more-efficient coil route in manufacturing, and developing downstream industry through incentive schemes and handholding.
While there’s no tax holiday or concession in place, improved railway connectivity and easy port accessibility definitely enables smooth transit of material. More such business enablers are needed to expedite growth in this region.
Q. Is there any other investment plan in your Jajpur unit as you have taken a huge area of land?
A. The first level of expansion in Jajpur plant, which is from 0.8 MT to 1.1 MT of annual capacity, will actually be done with an investment of only Rs. 40-50 crore, and is expected to be completed within a couple of months. In the next 2-3 years, we can double the existing capacity with an investment of around Rs. 450 crore.
Besides, owing to the presence of Jindal Stainless Limited at Jajpur, the neighbouring area offers immense scope for setting up a downstream stainless steel park. The presence of an industry leader fosters development of ancillary industries. For instance, in Hisar, several ancillary industries have come up around our plant area. These SMEs have an annual capacity of 1.75 lakh tonnes, which translates into an annual turnover of approximately Rs. 3,000 crore in value terms. These units in Hisar emerged without any government support. In Jajpur, with the facilitation of the government, we expect a far more organised and successful growth story.
Proposed to be developed in an area of 300 acres, the park promises immense potential for downstream industries (pipes and tubes, re-rollers, rice mills, general fabrication, etc.). The park will accommodate more than 90 downstream units as well as one or more anchor investors for need-based rerolling and service centre facilities. Jindal Stainless Limited, Jajpur will develop the land and provide infrastructure such as roads, water, drainage, power, etc. and social infrastructure.
By 2020, we expect all service utilities for the park to be ready. Our focus will be on two major industry segments: Thrust Industries (engineering and electrochemical industries) and Base Industries (ABC, ART, Kitchenware, Processing industry & Power).
Q. After full commissioning of the projects what would be your cost structure which can help you to penetrate more in the market?
A. Jindal Stainless Limited, Jajpur, is equipped with state-of-the-art European equipment that ensures no compromise on quality and cost-competitiveness with other players. We have an integrated complex and the means to employ ferro-chrome in liquid form, which saves production cost, increases efficiency, and ensures better price for the customers. It is a continuous process which helps us provide the best product at the best price. Costs are already running in their optimal state.
However, once we have better port connectivity and a functional downstream park, we will be able to save on transit costs as far as east India is concerned. That should definitely help in final pricing of goods.
Q. How is your venture affected in selling your products in India and in international markets by foreign competitors?
A. Jindal Stainless’ product quality is well recognized in the world market. The fact that we’ve supplied to ITER, Queensland metro, Sri Lankan railways, Integral Coach Factory, Gillette blades, etc stands testimony to our world-class quality. We supply to the European market, to countries like Germany, which abide by the highest quality standards in the world.
However, a low basic customs duty (BCD) of 7.5% for stainless steel products affects the competitiveness of Indian players. This causes absence of a level playing field.
Moreover, there is zero import duty for finished products from FTA countries like Indonesia, Japan, Korea, etc., but there is a 2.5% import duty on key raw material for stainless steel like ferro nickel and stainless steel scrap, which are not available in India. We are in discussion with the government to rationalise the import duties on these key raw materials. Further, there is an impending fear of increasing trade deficit, dumping of sub-standard products, and flood of imports post proposed Regional Comprehensive Economic Parternership (RCEP) tariff concessions which will give a zero duty access to Chinese products.
Surge in imports from Indonesia is another imminent threat faced by the Indian stainless steel industry. Chinese producers who have invested in Indonesia are indulging in a rampant misuse of India-ASEAN FTA. Cold Rolled stainless steel from China is exported to Indonesia for minor value additions, like slitting into smaller widths, after which, the same consignment is exported to India. In another method to evade the duties, Indonesia imports Hot Rolled stainless steel coils from China and then converts them into Cold Rolled stainless steel coils. These Cold Rolled materials are then exported to India claiming preferential duty of zero percent. In this manner, CVD of 18.95%, which is applicable on direct imports from China, is getting circumvented, which would have been levied, had the material come straight from China. This is also resulting in losses for the government exchequer.
It is pertinent to note that there has been a jump of almost 9 times in stainless steel imports from Indonesia as compared to the last year.
Q. What is your plan about product diversification in near future?
A. As economies mature, the application of stainless steel widens automatically. Already, this metal is finding prominence in new applications like railway infrastructure (railway bridges and foot-over-bridges), bus bodies, BS VI compliant exhaust systems, water industry, process industry, Mass Rapid Transit System (MRTS), etc. We’re proud suppliers to the recently launched Train 18, which is set to replace all Shatabdis in the future. Plans are also afoot to expand our product range to include stainless steel long products.
Our Hisar plant is already equipped to supply specialty products like coin blanks, precision strips, and blade steel. We are a licensed manufacturer and supplier for High Nitrogen Steel (HNS) grade for applications in the defence sector. Through our Hisar plant, we are continuously working to develop and supply special alloys for various strategic applications viz. submarine rocket launchers, armored vehicles, mine trawls, etc. We recently received a prestigious order of special steel sheets from ISRO for Rocket Motor Booster Application (Satellite Launch Vehicle). This is the first time in India when ISRO has procured from an indigenous source, which involves rigorous qualification processes.
Apart from diversifying our product basket, we are strengthening our distribution network, yards, and service centres across the country. These service centres will be equipped to provide just-in-time deliveries to our customers.