Lockdown extension would only drag the economy down: JSW's Sajjan Jindal

Sajjan Jindal, JSW Group Chairman
The lockdown has virtually brought industrial activity to a standstill. In an interview to Ishita Ayan Dutt, JSW Group Chairman Sajjan Jindal rings the alarm bells on the economic impact of a lockdown, saying that unless the government takes proactive steps, demand recovery could take 4-5 months. Edited excerpts:

You have expressed concerns over the impact of the lockdown. How should it be lifted?

The central government is very careful to keep the pandemic at bay and it is their priority. An additional two weeks of lockdown will definitely create some more problems but a gradual opening of the economy will help. Nothing has moved in the last one and a half months, which is usually the busy period before the monsoon. A real thrust is required on economic activity.
Areas that have more Covid-19 cases can be locked down or stricter controls put in place. Rest of the areas should be allowed to function normally. There is enough awareness now; people will take care of themselves.

Should normal activity resume in areas except red zones?

We should do what Germany, Sweden, West Asia, and other places are doing. They are bringing things back to normal. What is important is to bring the economy back on track, otherwise the damage will be greater.

Have you ramped up capacity following the Ministry of Home Affairs’ guidelines?

Before April 20, JSW Steel plants were operating at 10 per cent capacity. Now, the same has risen to 70 per cent and by May 4 we will be at 90-95 per cent capacity.

Do you have customers for a higher output, given that user industries are still not back?

User industries are preparing to restart operations. Till then, we are focusing on exports. For May, 60-70 per cent of our production is being exported and 30-35 per cent meant for the domestic market. But April was bad as we ran at 10 per cent till April 20. Between April 20 and April 30, we ramped up 40-50 per cent capacity. However, on an average, we would have been at 25 per cent. Of that, 20 per cent was exported.

What kind of stimulus package is required to get the economy back on track?

In the West, many countries are pumping in 10-20 per cent of the GDP in various areas to revive the economy. We can't expect that kind of stimulus here. So first, besides taking care of daily wagers and the poor, which the government is doing, it is also important to bring down interest rates. The RBI has done it, but banks must pass on the benefits. Basically, the MCLR should be brought down by 2 per cent.

Second, to increase liquidity, 20 per cent incremental working capital should be extended to industry, of which 25 per cent should be guaranteed by the Centre.

Third, there are views suggesting reduction of GST on all products to 10 per cent, for 3-6 months. That could create a huge demand pull. But if not feasible, the first two measures are imperative to reboot the economy.

Is there a need for more clarity on guidelines and better coordination with states?

The Centre’s role was to bring about awareness. Now, green and orange zones can be opened up with conditions like social distancing and other protocols. Rest should be left to the states to monitor. After all, they are losing heavily on revenues. The most essential thing is to make the economy run.

Many companies have announced salary cuts; is JSW also considering?

At JSW Steel, we are not looking at any cut at the moment.

What has the impact of the lockdown on JSW Steel been?

We are going to see significant reduction in capacity this quarter, given April was a big setback. Profitability will obviously be impacted. Export prices are also low, so the quarter will not be attractive.

However, on the brighter side, we are seeing new norms. This is a like a reset button and everyone is going to press the button to see how they can reorganise their businesses and reduce cost.

JSW Steel was in the midst of a major expansion at Dolvi. To what extent will that be impacted?

We planned to complete the project by June. But with this disruption, it may take another six months.

 When do you see demand recovery?

Unless the government steps up measures, it may take 4-5 months. In my opinion, we will see a significant dip in GDP growth, probably 3-5 per cent negative.

Is there a case for revision in the Bhushan Power & Steel bid price?

No, we are committed to it.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel