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Expert Talk Mr. Nand Kishore Taori

Managing Director (Steel Business) OCL Iron & Steel Ltd. (OISL)

ConQuest Online December 2011 Edition

ConQuest, IIM Shillong Consulting Club

Expert Talk Mr. Nand Kishor Taori

Managing Director (Steel Business) OCL Iron & Steel Ltd. (OISL)

ConQuest: Per capita steel consumption is merely 55 kg per annum in India, which stands th of the world average. Going forward, what opportunities do you see for the steel sector? Mr. Taori: There has been increase in the steel production in India. Per capita consumption hardly stood at 25 kg around 6 year earlier. But still it is nearly 20-30 % of developed countries which is quite low. Looking at the Governments impetus on the infrastructure spending, New Industrial Projects, Dedicated Rail Freight Corridors, new Power Plants, New Aluminium / Metallurgical plants, Refineries & other Industrial sectors, there will be substantial increase in steel consumption. There would also be increased demand from automotive as India is slated to become worlds Automobile hub, consumer durables and construction industry. Seeing our Countrys consistent GDP growth which is almost second to China, Indias economic boom will continue as per the forecasts. There are projections of achieving 200 Million Tonnes (MT) of installed capacity by 2018-19. In my opinion, if the government clears up the statutory delay hurdles & addresses land acquisition issues comprehensively with participation of Central, State Governments & Industry, the industry is geared up for the large investments as large amount of MOUs have been signed in the Mineral rich states of Orissa, Karnataka, Jharkhand, Chhattisgarh, West Bengal, MP, Andhra etc. The most of the projects could not be started due to statutory clearances which take generally more than 2 to 3 years & land acquisitions issues. Besides this, the general atmosphere should be Industry friendly. There should be time bound time limit for statutory clearances particularly MOEF and Forest Diversion clearances. ConQuest: Expansion in the steel sector, has been marred by issues like land acquisition, mining allocation and possible environmental regulation in future. In your opinion, what needs to be done by the Government and the industry to take care of it? Mr. Taori: Indeed, the regulatory and the statutory clearances have become nightmare for the industry. Major efforts are going into getting the clearances and the approval done by the statutory bodies which takes more than 2 to 3 years after the project is approved by the state Government. The Steel Industry is a Capital intensive Industry. One million ton of Integrated Steel Plant costs around Rs 4500 Crores. I believe both the government and industry has to take a pragmatic and responsible approach. Industry needs to actively contribute towards rehabilitation, providing employment, environment consciousness and whole host of others requirements. A government on its part has to look for faster clearances, transparency in mine allocation, developing road, rail, and ports infrastructures. The most importantly the Government at centre and state along with all statutory bodies should setting up a score card of the pending projects and defining time line for the clearing projects. The stringent monitoring mechanism should be in a place so that the clearances are time bound. One more suggestion, if the delay in according the clearances is more than specified time frame the clearance should be deemed to have been granted. This will increase the accountability. Industry which requires huge capital can tie up for funds and do the financial closures in a planned manner.

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ConQuest: Tata steel, JSW steel and SAIL are giants in the Indian steel market. How OISL differentiates and position itself ? Mr. Taori: OISL has very ambitious plans for the future. Our group has signed MOU(s) of close to 5 Million Tonnes for producing high grade & commercial grade steel. We have planned to produce alloy steel ,auto grade steel, Ductile Iron Pipe along with long products with 1000 MW Captive Power Plants associated with downstream Auto / Industrial parks in mineral rich states as well as in customer based states. Besides this we are going for expansion of existing plant. We are also setting up one of the largest Ductile Iron Pipe producing facility in eastern India. We have very professional team at Corporate as well as at Plant levels to achieve this vision. We are continuously recruiting dynamic professionals, Management Graduates & Engineers from reputed institution to realize this vision besides providing employment and training to the local people around the plant. We have state of art, training facilities to train youths of rural and urban areas. We are also sponsoring various training programmes for the local youth and our professionals. ConQuest: The commodity boom in the last decade has put pressure on the margins of metal producers. Again the profit of the steel producers also moves along with the steel prices. What strategies OISL employs to circumvent the situation? Mr. Taori: Price of raw material is indeed a very big concern for the industry. Iron ore which used to cost around Rs.200/tonnes in the late 90s is now trading at Rs 5000/- to Rs 6000/- per tonne. The similar is a case with the Coking Coal whose price has jumped from 75 $ per tonne in late 90s to approximately 300$ per tonne now. There is no choice for the steel manufacturing companies other than feeding costly Raw Materials whereas finish product prices have not gone up in the same proportion. Right now, we source raw material through a combination of short term and long term contracts. We have signed MOU(s) with the Odisha Government. Odisha Government has promised to look favorably for our iron ore, Chrome Ore, Magnese ore, and thermal Coal requirement at State as well as Central Government level. Indeed, the profit of steel companies is linked to the swings in the steel prices. At OISL, we put a lot of emphasis on operational excellence and efficiency to protect our margins. Being in the natal stages, it becomes easier to imbibe excellence into the system. ConQuest: OISL is already running captive power plant. Leveraging on the current expertise, does OISL also have plans to enter into commercial power generation? Mr. Taori: We have plans to set up fully integrated steel plant with captive power production units. We will have substantial captive power consumption. We plan to have arrangement to sell surplus power on to the State grid or as a merchant power as per the situation & prevailing rules of the State government in which plant is situated. ConQuest: Sir, you have worked both in the public sector and the private sector. What difference do you find in their style of working? Mr. Taori: Public sectors units and enterprises both have wonderful well defined systems. But they lack speed. Whereas private sector companies have fast decision making approach but systems are not at times well defined. I having worked in both public and private sector I combine systems of the public sector and speed of the private sector.

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ConQuest: And lastly according to you, how important is ethics in business? What is your advice to B-schools to sensitize future managers? Mr. Taori: Ethics is the single most important attribute in an individual. Business leaders should realize it is important not to chase short term profitability, compromising on the ethical and moral practices. We owe to our motherland for the natural and intellectual resources. We ought to return back to for the society & country by contributing in social and economic development of the country. In my opinion morals and ethics have to be explicitly defined and it has to be practiced. The training should start from the childhood and should be reinforced all through-out the life time.

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The Team

Conquest Online is the online edition of ConQuest which is a student driven Consulting club of IIM Shillong. The ConQuest Team includes Anurag Prasad | anurag10@iimshillong.in Hemant Bhargava | hemant10@iimshillong.in Manbir Singh Tandon | manbir10@iimshillong.in Partha Mitra | partha10@iimshillong.in Priyansh Modi | priyansh10@iimshillong.in Ritika Parasrampuria | ritika.p10@iimshillong.in Siddharth Jaidev | siddharth10@iimshillong.in Aritra Nayak | aritra11@iimshillong.in Arpit V Tripathi | arpit11@iimshillong.in Nimesh Nair | nimesh11@iimshillong.in Pochineni Shalini | pochineni11@iimshillong.in Rishi Gupta | rishi11@iimshillong.in Shirish Prakash Jain | shirish11@iimshillong.in Sunayna Agarwal | sunayna11@iimshillong.in Tarun Gupta | tarun11@iimshillong.in

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