C hief executive officer of Vedanta Limited (formerly known as Sesa Sterlite) Tom Albanese, told TOI that the company's top priority is to regain the lost markets for Goan iron ore. Vedanta has operations across iron ore, zinc, lead, silver, oil and gas, copper, aluminium and commercial gas.
Goa can be a much larger producer by tapping the latest technology, Albanese who was earlier with Rio Tinto, said. He further hailed the Narendra Modi government's initiatives to attract investments, but added that the reform agenda in India is not yet complete. Excerpts of the interview:
TOI: In Goa, iron ore mining officially restarted in October 2015. But the industry lacks buoyancy mainly due to low iron ore prices in the international market. Against this backdrop, how do you foresee the industry's situation over the next few years?
Albanese: Over the past four years, with there being no export of iron ore from Goa, other producers, specially from Australia, have come in and captured market share, particularly for lower grade iron ore. At the same time, we have seen that a product that was in a deficit at that time, is now in over-abundant. So, we have two hurdles to overcome. One is that we are now trying to sell in an oversupplied market and our particular edge, which is lower grade product, has been captured by new competitors. That means we need to work quite hard in marketing to ensure that we can put our newly mined product into the market place.
TOI: In the past, China was the largest importer of your ore...
Albanese: At this stage, we are focusing on Chinese steel mills. We have an advantage of Sesa having been a good brand name in the steel-making community. They know the product and we have some value-in-use advantages, compared to the Australian product in certain impurities, and we have been using these features. Again, when one is in marketing, one should play to one's attributes. We are playing to our attributes and, so far, we have been successful. In Goa, we now recognize that we have a double burden: low iron ore prices and the task of recapturing that market. So, the team here understands that it is critical for us to stay cost comparative to the extent that we still have some outstanding matters, such as double taxation between the Goa permanent fund and MMDR royalties. That's just one more hurdle we have to overcome to make this business successful. That would be good for the Goan economy.
TOI: There is 20 million tonne iron ore capping in the state, as fixed by the Supreme Court. How do you look at the situation in near future, specially as you are talking about modernization of mining operations?
Albanese: I think the industry is still running below the current court-decided cap. What you can see over the past four months in the core sector is beginning to ramp up and we ourselves could be in a position where we basically have used all allocated cap before the end of this calendar year. So, we will be working with the government to see that we get larger allocation of the current court cap in the shorter term while we hope to see that the court lifts the cap. We would actually like to get ourselves into a position where we can mine at a higher level than we'd been before mining was discontinued. I see a vision where Goa can be a much larger producer using latest technologies, probably in the manner that's less destructive on communities.
TOI: In the last couple of years before mining came to a halt in 2012, there had been opposition to mining due to environmental concerns. When mining restarted in the state last year, there was a problem regarding ore transportation. How do you intend to tackle it?
Albanese: I think, to some extent, it would be one step at a time. For example, I think that part of the solution, although not immediate, would be the establishment of a dedicated road corridor for trucks, and that involves capital. It take commitment by the government but it won't happen unless you have a reasonably healthy iron ore industry. I think that will go a long way, so that itself means you can increase production with less road congestion. Over time, I would like to see drivers being encouraged to switch over to larger trucks so that one can move more tonnes on the road with fewer trucks. We understand that we have to help create mechanism so that truck manufacturers come here and offer incentives to drivers to get modern trucks. Drivers need to have confidence that the industry is here for the long run in order to make that kind of large investment. There are some areas where one might be able to put conveyor belts and employ other type of technologies that can actually cause production to be greatly increased without putting all the pressure on the roads. None of these happen overnight.
TOI: How do you look at the situation in Karnataka in comparison to that seen in Goa?
Albanese: I think it is somewhat different. Unlike Goa, operations are year-round and there is no closure during the monsoon. There is a vibrant steel industry. Certainly, from the geological perspective, Karnataka has much more potential than Goa. As theirs is a higher grade product than Goa's, there's potential for a substantially larger industry, which could probably serve not only domestic producers but also cater to exports in the future.
TOI: After the NDA government came to power, Prime Minister Narendra Modi came out with lot of incentives for industry to grow. How do you look at the growth of the economy and industry, as Vedanta Limited dabbles in various sectors and not only in iron ore mining?
Albanese: Most of our production in India stays in India. So, having a home market for oil, iron ore, aluminium, zinc, lead, silver and copper are crucial. We appreciate the success of India's other growing sectors. We have been making sizeable new investments in India over the last several years. We have mining back-up in Goa. We have been able to start ramping up our aluminium business and we commissioned our power businesses. There appears to be a high level confidence that India is a good place to invest and a good place to do business.
TOI: What do you think are the major challenges for a company like Vedanta Limited in India?
Albanese: At this stage, I think the two biggest ones would be almost external to Vedanta, but it is in the stage of Vedanta players. First, would be a state-of-world commodities market so that even though we sell most of the product in India, it is sold based on global prices, allowing the global commodity market to play a huge part in terms of our own financial returns. We have seen huge volatility and it means we should focus on what we should control, which is increasing our production level, reducing costs and ensuring our businesses can be sustained even in the weakest market in the global economy. In this difficult market that has prevailed over the last 20 years, we would have invested about $2 billion over the past two years, mainly in India. This shows we are investing in India even with a difficult market.
The second big challenge is that the reform agenda in India is not yet complete. There continue to remain huge barriers for new development, new infrastructure and, ultimately, new manufacturing capacity. I think this needs continued efforts by the government to make India the most investment-friendly country in the world.
TOI: Elections in Goa are just 7to 8 months away and political parties and politicians would be seeking political funding from your company as they have done so in the past, especially for 2012 polls. Any change in your policy?
Albanese: We have been re-evaluating our policy. Recently, we have put in place limitations outside India, we are not funding political campaigns outside India.
TOI Goa News
Goa can be a much larger producer by tapping the latest technology, Albanese who was earlier with Rio Tinto, said. He further hailed the Narendra Modi government's initiatives to attract investments, but added that the reform agenda in India is not yet complete. Excerpts of the interview:
TOI: In Goa, iron ore mining officially restarted in October 2015. But the industry lacks buoyancy mainly due to low iron ore prices in the international market. Against this backdrop, how do you foresee the industry's situation over the next few years?
Albanese: Over the past four years, with there being no export of iron ore from Goa, other producers, specially from Australia, have come in and captured market share, particularly for lower grade iron ore. At the same time, we have seen that a product that was in a deficit at that time, is now in over-abundant. So, we have two hurdles to overcome. One is that we are now trying to sell in an oversupplied market and our particular edge, which is lower grade product, has been captured by new competitors. That means we need to work quite hard in marketing to ensure that we can put our newly mined product into the market place.
TOI: In the past, China was the largest importer of your ore...
Albanese: At this stage, we are focusing on Chinese steel mills. We have an advantage of Sesa having been a good brand name in the steel-making community. They know the product and we have some value-in-use advantages, compared to the Australian product in certain impurities, and we have been using these features. Again, when one is in marketing, one should play to one's attributes. We are playing to our attributes and, so far, we have been successful. In Goa, we now recognize that we have a double burden: low iron ore prices and the task of recapturing that market. So, the team here understands that it is critical for us to stay cost comparative to the extent that we still have some outstanding matters, such as double taxation between the Goa permanent fund and MMDR royalties. That's just one more hurdle we have to overcome to make this business successful. That would be good for the Goan economy.
TOI: There is 20 million tonne iron ore capping in the state, as fixed by the Supreme Court. How do you look at the situation in near future, specially as you are talking about modernization of mining operations?
Albanese: I think the industry is still running below the current court-decided cap. What you can see over the past four months in the core sector is beginning to ramp up and we ourselves could be in a position where we basically have used all allocated cap before the end of this calendar year. So, we will be working with the government to see that we get larger allocation of the current court cap in the shorter term while we hope to see that the court lifts the cap. We would actually like to get ourselves into a position where we can mine at a higher level than we'd been before mining was discontinued. I see a vision where Goa can be a much larger producer using latest technologies, probably in the manner that's less destructive on communities.
TOI: In the last couple of years before mining came to a halt in 2012, there had been opposition to mining due to environmental concerns. When mining restarted in the state last year, there was a problem regarding ore transportation. How do you intend to tackle it?
Albanese: I think, to some extent, it would be one step at a time. For example, I think that part of the solution, although not immediate, would be the establishment of a dedicated road corridor for trucks, and that involves capital. It take commitment by the government but it won't happen unless you have a reasonably healthy iron ore industry. I think that will go a long way, so that itself means you can increase production with less road congestion. Over time, I would like to see drivers being encouraged to switch over to larger trucks so that one can move more tonnes on the road with fewer trucks. We understand that we have to help create mechanism so that truck manufacturers come here and offer incentives to drivers to get modern trucks. Drivers need to have confidence that the industry is here for the long run in order to make that kind of large investment. There are some areas where one might be able to put conveyor belts and employ other type of technologies that can actually cause production to be greatly increased without putting all the pressure on the roads. None of these happen overnight.
TOI: How do you look at the situation in Karnataka in comparison to that seen in Goa?
Albanese: I think it is somewhat different. Unlike Goa, operations are year-round and there is no closure during the monsoon. There is a vibrant steel industry. Certainly, from the geological perspective, Karnataka has much more potential than Goa. As theirs is a higher grade product than Goa's, there's potential for a substantially larger industry, which could probably serve not only domestic producers but also cater to exports in the future.
TOI: After the NDA government came to power, Prime Minister Narendra Modi came out with lot of incentives for industry to grow. How do you look at the growth of the economy and industry, as Vedanta Limited dabbles in various sectors and not only in iron ore mining?
Albanese: Most of our production in India stays in India. So, having a home market for oil, iron ore, aluminium, zinc, lead, silver and copper are crucial. We appreciate the success of India's other growing sectors. We have been making sizeable new investments in India over the last several years. We have mining back-up in Goa. We have been able to start ramping up our aluminium business and we commissioned our power businesses. There appears to be a high level confidence that India is a good place to invest and a good place to do business.
TOI: What do you think are the major challenges for a company like Vedanta Limited in India?
Albanese: At this stage, I think the two biggest ones would be almost external to Vedanta, but it is in the stage of Vedanta players. First, would be a state-of-world commodities market so that even though we sell most of the product in India, it is sold based on global prices, allowing the global commodity market to play a huge part in terms of our own financial returns. We have seen huge volatility and it means we should focus on what we should control, which is increasing our production level, reducing costs and ensuring our businesses can be sustained even in the weakest market in the global economy. In this difficult market that has prevailed over the last 20 years, we would have invested about $2 billion over the past two years, mainly in India. This shows we are investing in India even with a difficult market.
The second big challenge is that the reform agenda in India is not yet complete. There continue to remain huge barriers for new development, new infrastructure and, ultimately, new manufacturing capacity. I think this needs continued efforts by the government to make India the most investment-friendly country in the world.
TOI: Elections in Goa are just 7to 8 months away and political parties and politicians would be seeking political funding from your company as they have done so in the past, especially for 2012 polls. Any change in your policy?
Albanese: We have been re-evaluating our policy. Recently, we have put in place limitations outside India, we are not funding political campaigns outside India.
TOI Goa News
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