Our Managing Editor Mr Narendra Shah and Our Senior Editor, Mr Manoranjan Kumar had a conversation with Mr V R Sharma, the Managing Director of Jindal Steel & Power Limited.
Here are some excerpts from the brief Conversation:-
Narendra Shah- JSPL has emerged as a leading manufacturer and supplier of Rails across India and the world today. What has been the strategy behind it?
V R Sharma – Delhi Metro started operation in the year 2002. They imported Head Hardened Rails from Japan and Europe. We, in JSPL, installed a Rail Mill in 1998. We were supplying Rails to Indian Railways for Railway Siding & yards.
The main track Rails were either imported or were supplied by SAIL, Bhilai. The consumption of Head Hardened Rails grade 1080 was increasing month after month because Delhi Metro commissioned its Phase-1, Phase-2 and declared Phase-3 expansion.
We met Metro Rails Engineers and found that the suppliers of Head Hardened 1080 grade worldwide are very few. We found an opportunity in this business. Since it was a highly technical product, we started scouting the useful and cost-effective technology so that the cost of Metro Rails Tracks can be reduced. We found a world’s reputed supplier SMS-Meer, Germany who had developed the Rails Head Hardened (HH) technology. Our Rail mill is also built by SMS-Meer group, Germany.
In the year 2013, we placed the order on SMS-Meer to supply us Head Hardening facility and integrate the same in our Rail Mill. In the year 2016, we commissioned our Plant and first order we got from Iran for Head Hardened Rails for High-speed Rails tracks. Successfully we supplied 20,000 tons HH Rails to Iran Rails and the quality certification was done by international quality control agencies. This was the beginning. After having supplied to the overseas customer and after obtaining a good size of the order, we approached Indian Metro Rail projects.
Narendra Shah – How was the response from Indian Metro Rail projects and Indian Railways?
V R Sharma – Initially the response was slow but finally Metro projects started taking an interest. The basic reasons for interest were the inconveniences Metro projects were facing in most of the cases.
1)To import HH Rails, the Metro projects were required to meet the conditions of foreign Rail suppliers in most of the deals such as –
a. Minimum order quantity (approximately 3000 – 5000 tons) to be given as per the demands of foreign Rail Suppliers.
b. Upfront opening of LC/TT Payment at least 4-6 months in advance.
c. Waiting time was too high, that is 4-6 months from tender floating to receipt of Rails.
d. Smaller lengths – 13 meter or 26 meter long Rails because of the sea route. Hence more number of weld joints are required.
e. The risk of currency fluctuation was on Indian buyers.
2)Buying locally from India is advantageous to the buyer.
a. We can supply as low as 500 tons quantity per order.
b. Our payment terms are flexible and customer friendly.
c. We deliver Rails up to project sites damage-free as the number of handling is reduced.
d. The delivery is done within 30-45 days or earlier if there is a specific request.
e. No risk of currency fluctuation.
f. Our Rails are RDSO approved and inspected by RITES (A Government of India Company).
g. We can deliver Rails in the length up to 234/260 meter which reduces the number of weld joints and laying is easier.
Narendra Shah- RDSO has recently approved 60E1 1175 Heat Treated (HT) Rails manufactured by JSPL for use in higher axle load & high-speed trains. How will this move change the future Rail business of your firm?
V R Sharma – The grade 1175 HT is an exciting product. Indian Railways asked us to develop this grade of Rails to enable them to carry heavy load/wagon that is 75 tons instead of 64 tons/wagon as of now.
We consulted our technology partner and finally, we produced these 1175 HT grades of Rails successfully. We believe that in the next 8-10 years the entire country will have 1175 HT grade of rail tracks. Now JSPL is fully approved for Main track Rails grade 880, R260, 1080 HH and 1175 HT. JSPL has already supplied Rails for the main track of Indian Railways.
Narendra Shah – Can you please tell how JSPL started its venture in the Rail business? How do you take it today as the Managing Director of the firm?
V R Sharma – The entire country’s mindset is changing after the campaign driven by Hon’ble Prime Minister, Mr Modi to go “ vocal for local”.
Indian Railways Engineers started utilizing the local sources as a substitute to imported Rails. Thanks to Hon’ble Prime Minister, Ministry of Steel, Ministry of Rails and Indian/Metro Railway Engineers.
Narendra Shah – What are the business prospects which you are looking for in the near future? Are you going to bring any new product for the Rail and Metro Sector?
V R Sharma – Indian Railways + Metro projects have projected 1.70 Million ton of demand of Rails per year. In addition, more than 2,00,000 tone Rails of 1080 grade are required by Metro Rails projects/Rapid Rail Projects in the country. Therefore, it is a huge market. The vocal for local will boost the sale of Rails from JSPL.
Narendra Shah – JSPL is already a key player in the Indian steel business and making good profits? How has the company performed in the last quarter?
V R Sharma – We made net profits in Q-4 of last year after a gap of more than 5 years. We are maintaining the same spirit in all subsequent months and quarter. During the Covid pandemic lockdown, we made an ever highest EBIDTA. In Q-2, we maintained the pace and earned EBIDTA more than Q-1. We have grown 19 % (YoY) in production and 30 % (YoY) in Sale and the EBIDTA margin is 31 %.
Manoranjan Kumar – Whom would you like to give its credit to?
V R Sharma – It is a complete teamwork and Mr Naveen Jindal is a farsighted person. Mr Jindal invested in Infrastructural steel making products rather than producing the commodities. He delegated his authority to his people so that they can work well and that is the reason the Company is doing well.
Manoranjan Kumar – The power sector is one of the most stressed sectors for the last few years. What is the status of the power business of JSPL?
V R Sharma – We are operating our power plants at 60 % capacity and the demand is picking up now. We have reached 70-75 % capacity utilization and in the next few months, we will reach to full capacity utilisation. We have requested the government of India for “One Nation One Tariff”, a policy which will enable the country to make the cost uniform across the country. The electricity prices are to be rationalized like telecom sector where its rate is uniform across the country.It will help revive the industry and create rapid industrialization across the country.
Manoranjan Kumar – The government of India had allocated a relief package of Rs 90,000 crores to the power sector. Has it brought any major change or something more is needed? Please express your views.
V R Sharma – The disbursement of Rs 90,000 Cr is definitely helping us because States are now in a position to pay on time for the electricity purchased by them.
Manoranjan Kumar- In which segment of the business, you are going to invest the most in the next financial year? What do you think about the power sector when it comes to investment?
V R Sharma – We are not going to invest in any of the businesses in the near future. We are going to make our company debt-free or lean debt company. We don’t want to take further loans from banks.
Manoranjan Kumar – What do you think about the future of the Steel and Power sector? Is the route for recovery going to belong for these sectors?
V R Sharma – The future depends upon the present. The current situation is very favourable for the steel industry. Most of the major/integrated steel plants are running @ 90-95% capacity utilisation.
Manoranjan Kumar – When we come to the Rail business, there are a lot of foreign players in the market? How can the Make in India move get successful in the Rail Sector? What do you expect from the government?
V R Sharma – I would like to request the Government of India to remove restrictive clauses from Global/Local tenders that impede the domestic players. Secondly, the Government of India shall come up with a clear direction to Metro Rail projects and Indian Railways that there should be No Imports of Rails.
Once again will reiterate that the restrictive clauses in tenders to be abolished to make the dream of ‘Atmanirbhar’ true. Sometimes we find clauses in tender documents of Rails that the supplier should be in profit during the last 3 financial years. Such clauses are detrimental to new suppliers. The Rails are sold on the basis of technical merits as per norms laid by RDSO and inspection by RITES (Government of India Co.).
The entry of foreign suppliers of Rails should be banned because local capacities & capabilities are available. If foreign suppliers want to avail share of Indian business then they should make an investment in India and should produce Rails in India. The concept of Atma Nirbhar Bharat should be kept in view always.
Manoranjan Kumar- Different RRTS projects are coming up in different parts of the country. The Bullet Train Project is also gaining pace. With this, the demand for rails will increase? What are your plans for the expanding Indian rail market?
V R Sharma – The Rail projects being executed on credit lines facility from different countries like Japan are very unfavourable for the steel industry in India specially for Rail manufacture. The Japanese Government is supplying Rails to Dedicated Freight Corridors and to Bullet train project. Government of India should discourage such a credit line facility where steel products or Rails are coming from the country who extends credit limit. Technology like Signalling system, Engines, Safety gadgets, control panels may be supplied by credit line countries.
Manoranjan Kumar – You have already started supplying Rails to Kolkata Metro. How has been your journey with Kolkata Metro? Do you have any ongoing deals with other Metro Corporations?
V R Sharma – Yes. We have already supplied to Kolkata Metro and we are expecting next order soon. The supplies to Pune Metro are going to be started shortly. Still, global tenders are being floated. Government of India/Ministry of Urban development must work on Hon’ble Prime Minster’s vision “ Vocal for Local” and should ban imports of Rails because we have capability & capacity to meet out entire requirements of Rails.
Manoranjan Kumar – Please share your views about the Atma Nirbhar Bharat plan and Make in India initiative? What are the major things which are vital for the success of these initiatives? Kindly express your opinion.
V R Sharma – This is a positive development. Thanks to Hon’ble Prime Minister, Mr Modi. I am sure, the whole country will soon start working in this direction. We must buy/prefer local products. This will boost our economy. India can be Atma Nirbhar in steel with immediate effect.
Manoranjan Kumar – Kindly share a message for our readers.
V R Sharma- It’s time to localize and you will be a torchbearer in this process of localization.