Interview - Malay Sengupta

MSTC
‘Serving the Secondary Steel Sector’

What is the overall Trading Scenario in the country?

MSTC has traditionally been trading only in one item viz. ferrous scrap. It is, therefore, not possible or proper to comment on the overall trading scenario in the country as a whole. However, it may be mentioned that trading inside the country is still the preserve of numerous small organisations in general. Before liberalisation, trading scene was dominated by giants like STC, MMTC etc. However,. mostly they were engaged in import and export trade. After liberalisation, a very large number of firms became engaged in import and export as well as in trading of domestic products. As a result, no uniform trading practice has emerged. The basic functions of trading is to move material ready for consumption, from its sources to the markets. In the process new markets are created and new products are developed. Trading therefore acts a vehicle for growth. In India also this need exists. Assortment value addition by way of customisation, management of credit to the customers and transportation are the essential ingredients of trading. Except for commodities, in all other cases it is mostly the manufacturers who are trying to manage these functions in India. This is a serious limitation which is restricting the growth of markets in India.

What are the major problems faced by the Import & Trading Sector in India?

For the past few years there has been a general stability in the import tariff etc. But still for the sake of development of import-export trading on a long term basis, it is necessary that the duty structure should be stable, at least they should not be tampered with in between budgets, sales tax should be replaced by VAT. Port conditions should improve permitting berth of larger vessels as well as improve the rate of loading and discharge: the roads must improve permitting movement of much-axle vehicles carrying larger tonnage and permitting movement at a higher speed.

Which are the thrust areas for Import & Trading in India?

This question needs to be talked separately for import and trading. In the import area, when in normal course thrust should be on import of materials whose landed cost in India is cheaper than the indigenous material. The emphasis should be on import of such material adding value to them and then export at least a part of it so that there is no burgeoning problem of balance of trade. In the steel sector today, coke and coking coal are items which every manufacturer would like to import primarily because of the non-availability of quality material within the country. However, port-based industries also import other items normally available within India because of the cheapness of ocean freight as compared to inland transportation cost within India.
Trading in steel sector is yet to take off on a significant scale. So far what little trading takes place, do so because of inability of the producers to reach across small customers or conversely inability of the customers to arrange procurement by doing necessary chasing. However, one has to note the change in the attitude of the mainstream producers. Appointment of dealers has now been undertaken by most of the large steel makers. This process will gradually be strengthened. World-wide traders provide a significant part of the working capital requirement of the manufacturers. Gradually this will happen in India also. Project sales as well as sale of construction steel will have to use the traders because. Trading by manufacturers at least in these segments may not be very cost effective.

What are your suggestions to improve the Trading Industry in the country?

What I have stated to the answer of question 1.1 feel the ability to quickly transport materials, strict legal enforcement of the negotiable Instruments, simplification of sales tax and excise laws etc. are vitally needed. For instance, if a trader buys material from a manufacturer and sells it to an end user, the end user faces no difficulty to avail MODVAT. However, if the trader sells through a channel of sub-traders etc. then MODVAT is no applicable to the end user. Through suitable introduction of VAT, this problem needs to be taken care of. Emergence of trustworthy and well-known, names in various fields of trading must also take place.

What about MSTC's recent activities?

We are concentrating on the existing business besides widening import basket. In 1999-2000 we are expecting 10-15% growth in our traditional domestic activities. 200% in our import activities over those in 1998-99. We are re-defining our mission as that of trading in bulk industrial raw materials. How far we will be successful remains to be seen.

What are your turnaround strategies?

There is no question of any turnaround in case of MSTC. Turnaround normally means turning a losing company into a profitable one. We have not made any loss in the past several decades. Therefore, there is no question of turnaround in MSTC. There is, however, need to arrest the declining trend of turnover and to increase the profits. For this we have widened our import basket by including petroleum products, coke DR Pellets, HR Coils, Slab End Cutting etc. in addition to our usual scrap business.

What management techniques have you adopted to make the turnaround possible?

As mentioned above, the strategy adopted for increasing the turnover and hence the profit is to add new items to the basket.
MSTC has a lot of talented people. What is needed is to motivate them and get them involved. Genuine involvement of people in both decision-making and implementation phase is what I trust motivates people which leads to better performance.
Does MSTC have any major long-term plan for expansion & diversification?
Yes. But for obvious this cannot be disclosed.
What role MSTC is playing as a Catalyst to the growth of Secondary Steel Sector?
MSTC acted as a catalyst in the growth of the secondary steel sector in 70s and 80s by arranging and procuring vitally-needed raw materials in scrap both from internal and external sources. Today with the development of strong DRI industries within the country, dependence on scrap as metallic has gone down. The primary constraint faced by secondary steel sector is to do with high cost of energy and low demand of steel, areas in which MSTC cannot help
Secondary steel sector is going through a phase of re-organisation. In the face of the market challenges, less viable units will have to be closed down. But hopefully Units with newer technologies and economic sizes will emerge. MSTC is continuing its role or providing imported scrap to anyone who feels he requires such material and will continue to do so.

What is your Vision 2000?

I see MSTC emerging as a trading house having significant presence in a few commodities. I foresee in these areas there will be convergence of domestic and international trade where MSTC will undertake to meet the customers' need for quality as well as time schedule which it may do through procurement either indigenously or from external sources.

Any comments on Government Policy?

None

Have you any observation on any other issues?

Trading can prosper in an atmosphere of market. A free market thrives as transparent market regulation which must be strictly enforced and aberrations speedily corrected. Regulatory authorities must be in place to ensure this. I hope the necessary transformation will take place within the next decade.