The Hindu : Business : A historic step, says Muthuraman

Online edition of India's National Newspaper
Tuesday, Aug 24, 2004

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Business

A historic step, says Muthuraman

By Our Staff Correspondent

MUMBAI, AUG. 23. The price cut announced by Tata Steel is a historic step; one that has never been taken by any player in Indian industry, according to B. Muthuraman, Managing Director, Tata Steel.

Addressing the media here today, Mr. Muthuraman said the Rs. 2,000 a tonne cut in steel prices was, in fact, a 10 per cent drop on net realisation basis, which was a huge drop. "We want the healthy demand for steel to continue. If prices were too high, there would be a demand recession, which is not healthy. If others follow suit and we take this initiative forward, inflation can be controlled.''

Mr. Muthuraman said the company would like to reduce export volumes from 11 per cent last year. "It would be a good measure if industry exports less and sells more steel in the domestic market for the next few months.''

About 30 per cent of the company's sales are through the distribution route and retail sales and the price cuts do not apply to these sales. The company has over 100 distributors and around 10,000 retailers. "We created the distribution route over the last few years. Although we would have liked to have reduced prices, it would be difficult as the premium could be mopped up by intermediaries. However, we will not change prices till March 2005 as we have already announced.''

Mr. Muthuraman said the prices have been reduced for all direct customers covering 70 per cent of the sales. "The price cut applies even to contracts which have been signed earlier with our direct customers. It does not, however, apply for export contracts.''

He further said that if input costs were to go up further, the company would find alternate ways to control costs. "After all, price is not the only thing affecting profitability. It includes input costs, volumes and product mix. What we lose in price, we will adjust in the other factors,'' he said.

The Tata Steel chief said the company had huge investment plans lined up over the next few years.

These include a six million tonnes per annum steel plant (up to slab stage) in Orissa at a cost of Rs. 8,000-10,000 crores, a port at Dhamra in partnership with Larsen & Toubro entailing an investment of Rs. 1,500-2,000 crores and a 10 million tpa iron ore mining facility at a cost of Rs. 5,000-6,000 crores.

The feasibility reports for the projects were ready and land and iron ore leases with the Orissa Government had been applied for.

Besides, the 2.4 million tpa plant at Jamshedpur was on schedule and would commence production on August 26, 2008, which was Tata Steel's centenary, Mr. Muthuraman said.

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