Do you expect raw material prices to go up due to the West Asia war?

Narendran: We are expecting cost to go up 10-15 per cent in the June quarter compared to March quarter. Coking coal cost will go up over $10 to $15 per tonne in India and Europe. Costs of other inputs such as propane and limestone have also gone up in India. We have been able to pass on the costs, but it depends on how long the war lasts. So far, we have been able to recover most of the cost increases from the market.

Given the power cost, will the Ludhiana electric arc furnace will be a costly affair?

Narendran: Electric arc furnace will typically cost more than a blast furnace. However, our electricity costs are quite low in Punjab. We have an agreement with the government on the supply of electricity. And a lot of the electricity is green energy, which i comes from Tata Power. Having said that, this model is different compared to an integrated steel plant where the operating cost may be lower, but the capital costs are much higher. So this plant was a 0.8 million tonne plant set up with ₹3,000 crore. It can be set up in 2 years. The whole business model is to collect and sell steel scrap within 300 km to save on transportation costs. Ludhiana plant will have a lower EBITDA margin than an integrated steel plant, but the return on capital invested can be comparable with blast furnace steel plant. Since the long product will be sold at Tata brand it will fetch a premium.

Will shutdown of coke oven plant in Netherlands impact profitability?

Koushik Chatterjee: We have two coke and gas plants and we have been asked by the regulator to look at an early shutdown of this, given some of the standards that have come in force on emission. Some of these standards are actually above industry standard and some of them are also technically not possible. The permission will never come. We were looking at closing down these two coke ovens in sequence in a planned and prudent manner. We want to do it in a calibrated manner rather than being forced to shut down in a short period of time because that will have a consequent impact on the environment and safety of the plant. It is more of a chemical plant than a steel plant. Possibly sometime in the year we will announce when this will be shut down and then work towards making that a safe transition.

Do you have alternate plan for sourcing coke?

Koushik Chatterjee: We will buy coke rather than make it. We can potentially buy from anywhere in the world, depending on the coke quality. So buy from those coke merchant or coke facilities, which can convert good quality coal to coke. And also potentially look at options if it can be sourced from India.

Will sourcing coke from outside push up cost?

Koushik Chatterjee: Yes, there will be a certain cost increase because when we make coke there are by-products. We get gases, which can used for energy. However, there will be a logistics cost from wherever we source it. Besides there will be handling cost on the port. There will be incremental cost but that will be marginally offset by CO2 emission cut.

Will this pull down Netherlands to losses?

Narendran: Netherlands business has always been EBITDA positive except for two years back when the Blast Furnace 6 was shut down. Obviously, depending on the regulatory costs of compliance EBITDA will go a bit up and down. It never sought support from India. The key question is if you have to build new facilities then what is the regulatory environment and conditions which we need to have before we can go forward with that work. This is a conversation we are having with the government.

Will the delay in electricity connection delay UK project?

Koushik Chatterjee: In the UK, the project inside the plant is progressing well. The vendors have been given orders. The time to implement is broadly plus minus few months. The issue is in relation to national grid which provides electricity. They formally alerted us that there is a delay on their end. So that is a precursor to the full commissioning of the project. We are working with the National Grid and the government to understand how we can resolve issues to make it faster and as per plan. The delay is not going to help us in terms of starting up the plant, even if the project is completed. We are working with them to reduce the delay and bring the project live as soon as the plant is completed.

Do you expect a cost overrun in UK project?

Koushik Chatterjee: Yes we are expecting it. There is a risk of increase in cost if there is delay in power supply by the National Grid. We have not quantified it fully. It will take us about couple of months to do that.