We must get rid of subsidy, says Chairman of BSRM
Wednesday, 21 December 2011
Our Ctg Correspondent
Chairman of BSRM (Bangladesh Steel Re-rolling Mills Ltd) Alihussain Akberali in an interview with the FE talks on various issues in relation to the country's trade and economy, specially on steel industry. Following is the text: FE: Industries and businesses in Chittagong remain gas-starved for long due to rationing of the same that made a dent in production in most of the sectors. There is no early hope of ray either as the Semutang gas has been diverted to fertilizer factories. Please comment. Answer: It is sad that Karnafully Gas Co Ltd, Chittagong has not given gas connection to some industries even though they have received the deposit for gas some 3 years back. As a matter of principle that gas connection should have been given to such applicants. What will happen if the gas connection is given to such industries who paid the deposit money? The gas consumption will increase and the reserve will deplete. So what? Everyone should be equally affected. On the basis of their gas demand having been paid, industries invested a huge amount and some industries are still closed and not started and some industries like ours is losing Tk one million every month by using furnace oil !At best they could have delayed gas to some government-owned high gas consuming industries in city. This matter has really shocked our industrial sector. FE: For the third time in a year the Bangladesh Energy Regulatory Commission (BERC) on November 25 last raised electricity tariff for bulk consumers by about 34% on average. What will be the impact on production in different sectors including the re-rolling industries? Ans: No doubt it will increase costs of the products in matter of time but I feel the increase will be negligible. In China the power costs are nearly double that of Bangladesh where huge coal reserves are there and sea water is available for cooling water requirements. We must get rid of subsidy if we want to have an economic growth. We are already having huge power shortage and if the prices are not brought to international levels why the private sector power projects be set up in the country under the Merchant Power Policy or even under Captive Power Policy. Not a single unit has been set up under the merchant power policy so far. We already are having very low power tariff for small and marginal domestic power consumers. One of the major reasons for high power cost in our country is power theft and if this can be contained I am sure, stabilized power will be available to bonafide consumers. FE: Huge investment has been made in the steel and re-rolling industry over the last few years. BSRIVI is a pioneer in this sector. India is likely to become a major buyer of IVIS Rod if Bangladesh can take the opportunity. What are the impediments in export of rod? And why has the government allowed import of IVIS Rod? Ans: We appreciate the fact that India has given duty-free access to Bangladesh steel products into their country. Unfortunately non-tariff barriers are still there and unless these are removed we cannot make any headway to exporting to India and that too only to the 7 north-eastern states of India. We cannot compete with iron ore based industries in India on the western side of Bangladesh. It is quite strange that while Bangladesh has not imposed any bar on import from India but India will not allow any companies in Bangladesh to export to India unless the said company is registered with Bureau of Indian Standard (BIS). Our company, the latest state of art mill in Bangladesh producing the best quality steel equal to the likes of Tata, had applied to BIS about 15 months back and till date permission has not been granted to us. Even for argument sake if permission is granted, what guarantee is there that we will not buy cheap upgraded rods from the local market. We feel such quality imports should be left to the Indian importers only like we in Bangladesh are doing. We are importing about 40,000 tons of billets a month but we hardly import from India because their quality from the Bengal Area is not as good as we want. Their billets are mainly from Sponge Iron which is high in Sulfur and Phosphorous and we wonder how the BIS allows such industries to produce rods with high S and A. Almost all mills in the West Bengal and Orissa are making inferior products which BIS is not closing. In the past when there was a huge shortage of steel in our country and prices had gone up, we imported rods from lot of mills in the West Bengal area and none of these mills rods qualified in our test laboratories and thus we could not sell in the local market. Hope the government of India would seriously consider doing away with BIS certification and let the buyers and sellers on both sides of the country take decisions. Customers have become real smart. Why will they buy inferior products? Even if they import once they will not be able to sell and eventually they will stop such imports. The living example we have before us is that BSRM products like Tata are selling at a premium of Tk. 516WO per ton than scrap based rods in the local market. But they are surviving. FE: The country has a good number of quality steel production plants in the private sector. What steps are there to sell quality steel products at competitive prices? Ans: The slogan 'survival of the fittest" is what we believe in. Maintaining quality is our major challenge and we have to spend lots of money and efforts to ensure that our quality is consistent. With the country's demand on the increase almost a quality producers will survive. Demand for inferior and dubious quality is coming down day by day with many quality producers are coming into this line. FE: What are the problems in procurement of raw materials for steel plants in view of the setback faced by the ship breaking industry, which is a major source of raw material? Ans: Melting industries producing billets will not suffer in a big way because if there is a shortage of scrap ships, we can import. But small ship scrap based rolling mills will be in trouble and thus huge number of labour force will be rendered jobless. Roll-able scraps are not available in the world market. There are small houses which do not need quality rods so they buy cheaper rods with low strength from ship plates which of course is of good quality because it is Lloyd tested steel. FE: High strength steel like 60-grade rod is drawing greater popularity among the real estate developers. What about expansion and diversification of steel products in the private sector? Ans: Now grade 60 rods is being slowly replaced by g500 rods which a number of rolling mills in our country are now manufacturing. With g500, the real estate builders and developers can also save minimum 15% further quantity of steel than g6O but then they have to maintain good quality of concrete which is easily available and possible to us at site. FE: What about the infrastructure support expected from the government in promoting the steel industry? Ans: This is a major concern for all of us. It takes years after years to build bridges. Government has to immediately do the following if they really mean business. A. For Road and Bridges and Flyovers: 1. First and foremost they have to pass law immediately in the Parliament even if the session has to be summoned again, to give full clear and strong authority to the relevant government departments to take over the rights of way on land for power, take over land for building bridges or culverts expansion, take over land for flyovers, etc at a very short notice. 2. This law must stipulate that the government in doing so, must give more than market compensation to the affected parties or they may opt to give them alternate plots or land on government housing projects or on other government khas land or they may give them extra bonds over and above the compensation money which they can use to pay off their tax, customs, VAT, etc liabilities. If the government has to get any industry shifted due to compulsion for any infrastructure project, they should give them alternate land, power and gas alongwith an agreed sum to build up the facilities for such mills. 3. Once the above is in place, our government should get 1 or 2 consultants from abroad to do a survey jointly with our Road and Highways, MES, PWD, WDB, etc which are the areas where we need flyovers, bridges and culverts and roads to improve the entire country's road infrastructure. 4. Once the above survey is done and report is submitted, the government should then go ahead first for acquisition of the land in all those areas where such projects are to be set up. 5. Then they should invite tenders on BOT such projects with fixed time frame to start after the land has been requisitioned and made ready for development. Severe penalty should be imposed on such BOT projects if they delay by one day. 6. BOO projects should be paid a fixed return on their investment and such repayment with interest should be paid by the government by adding a surcharge on all road vehicle tax paid by all transporters in the country. B. For power projects: 1. Government should earmark land by the river and sea and urgently acquire such lands at higher than market prices and they can take back the money so paid from the entrepreneurs of power projects. Area of the land should be sufficient for a particular sized power project which the government wants to build in that particular area. 2. Government must give permission and clearances to set up jetty by the side of the river or sea alongwith the land to avoid delays by the Ministry of Shipping or CPA or other agencies. 3. Such law should be enacted that any power project needing sea water to be brought to their site for power projects, the same can be made available through government efforts. 4. Once land is ready the government should put the following tenders parallel on Private Public partnership basis: a) Transmission towers and conductors laying a 400kva line from one point to the other. b) Merchant Power Producer or Captive Power Producer to be allowed to set up power projects on the land so allotted. c) They should be allowed to do wheeling of power on the 400kva line and such wheeling charges and transmission losses must be highlighted in the EOI that they will float. The above are just broad suggestions. Government should study in-depth for making my suggestions more fruitful. FE: Has the government any short, mid or long term roadmaps to make the steel sector more vibrant? Ans: We are surviving on our own luck, merits and hard work. In the last 35 years of my experience in running our group of industries, I have never been called by any government agency to get my views on the steel industries, their problems or suggestion. Not only this. We have never been given any replies or called for discussion on our various suggestions, applications etc that we make to the government agencies. We the private sector can turn the country around very quickly, if we are supported actively and objectively by the relevant government offices. There is no policy document for the steel sector.
Chairman of BSRM (Bangladesh Steel Re-rolling Mills Ltd) Alihussain Akberali in an interview with the FE talks on various issues in relation to the country's trade and economy, specially on steel industry. Following is the text: FE: Industries and businesses in Chittagong remain gas-starved for long due to rationing of the same that made a dent in production in most of the sectors. There is no early hope of ray either as the Semutang gas has been diverted to fertilizer factories. Please comment. Answer: It is sad that Karnafully Gas Co Ltd, Chittagong has not given gas connection to some industries even though they have received the deposit for gas some 3 years back. As a matter of principle that gas connection should have been given to such applicants. What will happen if the gas connection is given to such industries who paid the deposit money? The gas consumption will increase and the reserve will deplete. So what? Everyone should be equally affected. On the basis of their gas demand having been paid, industries invested a huge amount and some industries are still closed and not started and some industries like ours is losing Tk one million every month by using furnace oil !At best they could have delayed gas to some government-owned high gas consuming industries in city. This matter has really shocked our industrial sector. FE: For the third time in a year the Bangladesh Energy Regulatory Commission (BERC) on November 25 last raised electricity tariff for bulk consumers by about 34% on average. What will be the impact on production in different sectors including the re-rolling industries? Ans: No doubt it will increase costs of the products in matter of time but I feel the increase will be negligible. In China the power costs are nearly double that of Bangladesh where huge coal reserves are there and sea water is available for cooling water requirements. We must get rid of subsidy if we want to have an economic growth. We are already having huge power shortage and if the prices are not brought to international levels why the private sector power projects be set up in the country under the Merchant Power Policy or even under Captive Power Policy. Not a single unit has been set up under the merchant power policy so far. We already are having very low power tariff for small and marginal domestic power consumers. One of the major reasons for high power cost in our country is power theft and if this can be contained I am sure, stabilized power will be available to bonafide consumers. FE: Huge investment has been made in the steel and re-rolling industry over the last few years. BSRIVI is a pioneer in this sector. India is likely to become a major buyer of IVIS Rod if Bangladesh can take the opportunity. What are the impediments in export of rod? And why has the government allowed import of IVIS Rod? Ans: We appreciate the fact that India has given duty-free access to Bangladesh steel products into their country. Unfortunately non-tariff barriers are still there and unless these are removed we cannot make any headway to exporting to India and that too only to the 7 north-eastern states of India. We cannot compete with iron ore based industries in India on the western side of Bangladesh. It is quite strange that while Bangladesh has not imposed any bar on import from India but India will not allow any companies in Bangladesh to export to India unless the said company is registered with Bureau of Indian Standard (BIS). Our company, the latest state of art mill in Bangladesh producing the best quality steel equal to the likes of Tata, had applied to BIS about 15 months back and till date permission has not been granted to us. Even for argument sake if permission is granted, what guarantee is there that we will not buy cheap upgraded rods from the local market. We feel such quality imports should be left to the Indian importers only like we in Bangladesh are doing. We are importing about 40,000 tons of billets a month but we hardly import from India because their quality from the Bengal Area is not as good as we want. Their billets are mainly from Sponge Iron which is high in Sulfur and Phosphorous and we wonder how the BIS allows such industries to produce rods with high S and A. Almost all mills in the West Bengal and Orissa are making inferior products which BIS is not closing. In the past when there was a huge shortage of steel in our country and prices had gone up, we imported rods from lot of mills in the West Bengal area and none of these mills rods qualified in our test laboratories and thus we could not sell in the local market. Hope the government of India would seriously consider doing away with BIS certification and let the buyers and sellers on both sides of the country take decisions. Customers have become real smart. Why will they buy inferior products? Even if they import once they will not be able to sell and eventually they will stop such imports. The living example we have before us is that BSRM products like Tata are selling at a premium of Tk. 516WO per ton than scrap based rods in the local market. But they are surviving. FE: The country has a good number of quality steel production plants in the private sector. What steps are there to sell quality steel products at competitive prices? Ans: The slogan 'survival of the fittest" is what we believe in. Maintaining quality is our major challenge and we have to spend lots of money and efforts to ensure that our quality is consistent. With the country's demand on the increase almost a quality producers will survive. Demand for inferior and dubious quality is coming down day by day with many quality producers are coming into this line. FE: What are the problems in procurement of raw materials for steel plants in view of the setback faced by the ship breaking industry, which is a major source of raw material? Ans: Melting industries producing billets will not suffer in a big way because if there is a shortage of scrap ships, we can import. But small ship scrap based rolling mills will be in trouble and thus huge number of labour force will be rendered jobless. Roll-able scraps are not available in the world market. There are small houses which do not need quality rods so they buy cheaper rods with low strength from ship plates which of course is of good quality because it is Lloyd tested steel. FE: High strength steel like 60-grade rod is drawing greater popularity among the real estate developers. What about expansion and diversification of steel products in the private sector? Ans: Now grade 60 rods is being slowly replaced by g500 rods which a number of rolling mills in our country are now manufacturing. With g500, the real estate builders and developers can also save minimum 15% further quantity of steel than g6O but then they have to maintain good quality of concrete which is easily available and possible to us at site. FE: What about the infrastructure support expected from the government in promoting the steel industry? Ans: This is a major concern for all of us. It takes years after years to build bridges. Government has to immediately do the following if they really mean business. A. For Road and Bridges and Flyovers: 1. First and foremost they have to pass law immediately in the Parliament even if the session has to be summoned again, to give full clear and strong authority to the relevant government departments to take over the rights of way on land for power, take over land for building bridges or culverts expansion, take over land for flyovers, etc at a very short notice. 2. This law must stipulate that the government in doing so, must give more than market compensation to the affected parties or they may opt to give them alternate plots or land on government housing projects or on other government khas land or they may give them extra bonds over and above the compensation money which they can use to pay off their tax, customs, VAT, etc liabilities. If the government has to get any industry shifted due to compulsion for any infrastructure project, they should give them alternate land, power and gas alongwith an agreed sum to build up the facilities for such mills. 3. Once the above is in place, our government should get 1 or 2 consultants from abroad to do a survey jointly with our Road and Highways, MES, PWD, WDB, etc which are the areas where we need flyovers, bridges and culverts and roads to improve the entire country's road infrastructure. 4. Once the above survey is done and report is submitted, the government should then go ahead first for acquisition of the land in all those areas where such projects are to be set up. 5. Then they should invite tenders on BOT such projects with fixed time frame to start after the land has been requisitioned and made ready for development. Severe penalty should be imposed on such BOT projects if they delay by one day. 6. BOO projects should be paid a fixed return on their investment and such repayment with interest should be paid by the government by adding a surcharge on all road vehicle tax paid by all transporters in the country. B. For power projects: 1. Government should earmark land by the river and sea and urgently acquire such lands at higher than market prices and they can take back the money so paid from the entrepreneurs of power projects. Area of the land should be sufficient for a particular sized power project which the government wants to build in that particular area. 2. Government must give permission and clearances to set up jetty by the side of the river or sea alongwith the land to avoid delays by the Ministry of Shipping or CPA or other agencies. 3. Such law should be enacted that any power project needing sea water to be brought to their site for power projects, the same can be made available through government efforts. 4. Once land is ready the government should put the following tenders parallel on Private Public partnership basis: a) Transmission towers and conductors laying a 400kva line from one point to the other. b) Merchant Power Producer or Captive Power Producer to be allowed to set up power projects on the land so allotted. c) They should be allowed to do wheeling of power on the 400kva line and such wheeling charges and transmission losses must be highlighted in the EOI that they will float. The above are just broad suggestions. Government should study in-depth for making my suggestions more fruitful. FE: Has the government any short, mid or long term roadmaps to make the steel sector more vibrant? Ans: We are surviving on our own luck, merits and hard work. In the last 35 years of my experience in running our group of industries, I have never been called by any government agency to get my views on the steel industries, their problems or suggestion. Not only this. We have never been given any replies or called for discussion on our various suggestions, applications etc that we make to the government agencies. We the private sector can turn the country around very quickly, if we are supported actively and objectively by the relevant government offices. There is no policy document for the steel sector.