‘The biggest impact will be on coal and hence on power cost. Then comes iron ore, coking coal, bauxite.’
Photograph: Andrew Yates/Reuters
Tata Steel and the United Kingdom’s (UK’s) newly elected Labour government are in discussion on grants to fund the transition to greener steel and are exploring a viable business case beyond what was agreed upon with the Conservative government.
In a video interview with Ishita Ayan Dutt/Business Standard, T V Narendran, managing director and chief executive officer, Tata Steel, discusses issues from the UK strategy to the potential impact of the recent Supreme Court ruling on mineral tax.
Dutch operations are back to normal, but Ebitda (earnings before interest, tax, depreciation, and amortisation) losses in the UK continue. What is the outlook on Europe?
Operations in the Netherlands will continue to stabilise and get better operationally.
We were operating almost at a 6.8 million tonne (mt) annual production level in the first quarter. The aim is to take it to 7 mt.
Also, a lot of initiatives are going on to take out costs so that we get operations in the Netherlands back to where they belong.
Typically, they are at the top of the table in the European steel industry.
In the UK, after the losses in Q1 and Q2, we will see a better situation because all the heavy-end assets will have been closed by the end of September.
So, H2 should be better than H1 for Tata Steel Europe.
Tata Steel had earlier said the transition could potentially impact 2,800 jobs in the UK.
With the Labour government aiming to secure “job guarantees”, can that number come down?
The government is supportive and wants to find a better future.
They (the government) are asking if we would like to add other facilities with support from the government.
If we can invest in some downstream then that is one way of creating or protecting some more jobs.
There is no significant change in our plan but we are in conversation to see if there are any further ideas that can be explored.
From our point of view, due to natural attrition, the number (of impacted jobs) may have come down to 2,600.
And we have 1,700-1,800 people indicating an interest in the voluntary redundancy scheme.
So the gap between how many people need to go and how many people are willing to go has become shorter.
We are moving in the right direction and we are also trying to do it in the best manner possible.
Does this mean that there is no risk to the Pound 500 million grant from the UK government?
We are separating it into two. One is the grant agreement for the electric arc furnace (EAF). If there is something else, that will be a separate discussion.
In that sense, there is no risk. If there is no grant-funding agreement, there is no EAF. That is not what anyone wants.
Is there a possibility of higher investment in the UK?
The Labour government has said there is a Pound 3 billion fund available.
In this, Pound 500 million is coming to us. They are saying, if you want more, come back with a proposal and we are happy to support you.
But that has to be a viable proposal for us and them.
We will evaluate the second phase over the next few months and if there is a business case, we will look at it.
When do you think the grant-funding agreement will be executed?
The agreement has been finalised or negotiated. During this quarter, we hope we have a “Heads of Terms” agreement.
You have indicated Rs 17,347 crore as the impact of the Supreme Court ruling on mineral tax.
So this is what you have to pay if the court rules states can retrospectively impose taxes on mineral extraction?
Not necessarily. This is what we have been declaring in our annual reports every year as contingent liabilities. It’s been growing every year.
There was an Act in 2005 which we contested and it was quashed in the Odisha High Court.
Before it was quashed, the Odisha government had indicated what was payable. We don’t have a demand beyond that.
Odisha appealed in the Supreme Court. Since it was pending litigation, we kept adding it to our contingent liabilities.
But given the Supreme Court judgment we had to notify it in the interests of transparency.
Once we have the full judgment we would need to look at all the aspects and then contest it.
Is the ruling cause for concern for Tata Steel, which has mines in Jharkhand and Odisha?
It’s cause for concern for the mining industry and any downstream business based on it. The biggest impact will be on coal and hence on power cost. Then comes iron ore, coking coal, bauxite.
There is concern on what will be the cascading effect of this on everything that is made using iron ore or coal or bauxite.
The court has given guiding principles based on the existing law.
The government at the Centre also has to take a call on the amendments that it wants to make to the Mines and Minerals (Development and Regulation) Act.
Skill development was a focus area for the Budget. What is your view on the new internship programme?
It’s not just about taking interns but making sure they have meaningful work to do.
Tata Steel has a process of taking interns.
So we are waiting for the details and then we’ll see what needs to be done.
Feature Presentation: Aslam Hunani/Rediff.com
