'Develop infrastructure during global slowdown'

NEW DELHI: The global slowdown should be used as an opportunity to develop infrastructure in the country as commodity prices have crashed the world over, believes SK Roongta, chairman, Steel Authority of India. This would not only help in developing crucial infrastructure like roads, ports, railways, shipyards and power plants at a competitive cost but also help revive the domestic economy and provide a base for future growth, he told TOI in an exclusive interview.
Steel prices have crashed by more than 50% in the global market. Roongta said the severity of the condition could be understood from the fact that global steel production has come down by over 25%. If Chinese production is excluded, global production is down by over 40%, with output having almost halved in developed countries. The price of hot rolled coils has fallen to $430 per tonne from around $1,200 per tonne in the first half last year.
However, Roongta expressed optimism that prices may have bottomed out as many producers globally are losing money at the current price. He claimed that SAIL was still making money because of its efficient production line.
Despite economic turmoil in the global market in the quarter ending December 2008, SAIL earned a net profit of Rs 843 crore at an operating margin of 19%. But, in the same quarter of 2007, when the economy was booming, the company had earned a profit of Rs 1,934 crore at an operating margin of as high as 35%.
In order to improve the efficiency of its plants and prepare for future demands for the steel sector, SAIL is still going ahead with its modernization and expansion program. It has undertaken an ambitious plan to expand its capacity from 14 million tonnes to 26 million tonnes by 2011. The company is also going ahead with its modernization plan, like the implementation of continuous casting mill, which is energy efficient.
In order to avail of the opportunity offered by the present downturn, Roongta said that the company is looking for acquiring assets like coaking coal mines abroad. He said because of the global slowdown, the values of mines have come down.
However, on the steel sector in the country, he said that his main worry is on the declining margin. In the light of huge over capacity in the world for steel production, he said margin will remain under pressure for some time to come. Because of this, he said the chances of delaying of the proposed new Greenfield steel plants in the country are high.
In this scenario, he said the government should create environment to enhance investments in the infrastructure sector in the country.