Asian Metal: First, thanks for your time for granting this interview, and would you please introduce your company briefly?

Raghunath: It is pleasure for providing me an opportunity to express and exchange my opinion on the global scenario of Bulk Ferro Alloys. Our Company Balaji Electros Smelters Ltd. started operations in the year 1991 in the state of Maharashtra, India and, so far, is exporting SiMn 65/16 to twelve countries. Our company granted some Manganese Ore leases in the state of Andhra Pradesh. Some of our applications for granting of Prospecting License and Mining Leases are pending with the Govt. We are awaiting Environmental Clearances for some of our granted Mining Leases. We stopped construction activity of expansion for setting up Ferroalloys Units in Andhra Pradesh because of shortage of power and steep increase of power tariff combined with glut in the market.

Asian Metal: How do you see the ferroalloys industry evolving in the short-term given global weak demand, especially in relation to high power tariff and excess capacity of Indian producers of SiMn and FeMn?

Raghunath : ln the short-term, there is no hope of recovery because of many factors and prevailing weak global demand. And in India, Power Distribution companies in some of the States have not increased power tariff for many years and subsequently incurred huge losses. For reviving their financial strength, the Ministry of Power and the government of India formulated a Scheme for Financial Restructuring (SFR) of these power utilities with the help of State Governments. So far six States agreed and submitted proposal to the Government of India, which includes Andhra Pradesh and Tamil Nadu States. Now most of the Power Distribution Companies in India increasing power tariffs to the consumers and being a power intensive industry there would be steep increase of cost of production of Ferro Alloys. There was excess capacity in India. Many Ferro-alloys units particularly in the State of Andhra Pradesh sprang up because they were attracted by the then cheaper power tariff. At present many old Ferro-alloys units closed down and new Units stopped construction activity in Andhra Pradesh.

Asian Metal: Are there excess capacity and shortage in both China and India respectively given the forecast that these two economies will continue to grow at near double digits in the foreseeable future?

Raghunath: There has been excess capacity both in China and India. Global slowdown seriously affected both countries. In India, infrastructure companies are in serious financial problems. Inflation, Land acquisition problems, Environmental clearances, weak global demand, high cost of loans, high Fiscal Deficit and Current Account Deficit, increasing of Non-Performing Assets of Public Sector Banks, coal linkages to thermal power plants and many other factors hindering growth in India. Current Account Deficit is a major problem in India. Major portion of imports of India are Oil and Gold. Measures taken to discourage Gold imports by the Indian government have not been yielding any results. Hence, under the present weak global economy, I do not foresee double digit growth in these countries in near future.

Asian Metal: And looking at the specific products in the ferroalloys industry, SiMn 60/14, SiMn 65/17, SiMn 70/15 do you see a growing demand of one over another in the short-term and medium-term, and what can Indian producers do in the face of the higher power tariff?

Raghunath: Previously in the International market only SiMn 65/17 was in demand. In India, steel industries were using SiMn 60/15 grade material. However, during the time of shortages, some Indian steel plant started using SiMn 60/14 and SiMn 58/13. Likewise in the global market, some steel industries started using SiMn 60/14. With higher tariff, cost of production of SiMn 65/17 will be more in comparison to SiMn 60/14 and making exports uneconomical to Indian producers.

Asian Metal: ls the stainless steel sector and alloy steel going to recover in the coming year?

Raghunath: There is no hope of recovery because of continuing of weak global economy and for various reasons enumerated above.

Asian Metal: Do you envisage any new technology to change the trajectory f the bulk alloys in future?

Raghunath: Major raw material components of bulk Ferro alloys are Ore and reducing agents. To convert Ores into alloys requires lot of heat ranging 1200 Celsius to 1600 Celsius for which power is required. I do not envisage any new technology making drastic cut in cost of production in near future. Depletion of coal resources in future years results increase of coal prices which in turn impact on thermal power becoming costly and unaffordable. Solar energy could be only hope in the future for cutting down cost of production of power. Research and Development on Solar Energy is going to cut down the cost of production mostly by increasing load factor. However, it is unfortunate some solar equipment manufacturing industries like Suntech are facing severe financial problems.

Asian Metal: How has your company weathered the economic recession and how do you continue to be a relevant player in the industry?

Raghunath: Our Ferroalloys unit is located in Maharashtra State where power tariff has always been higher in comparison to other states in India. However, with efficient operations we are able to overcome many threats whenever market demand for our products is weak. We accustomed with higher power tariffs. We now are contemplating to start our unit in Andhra Pradesh where our manganese ore mine is located. We are exploring how to generate more revenue by using Silico Manganese slag whish is considered as waste by the industry.

Asian Metal: Any suggestion to policy makers regarding output and export?

Raghunath: Ferroalloys industries use ores, power and reducing agents. Being a power intensive industry, one cannot expect cheaper tariffs when there is shortage of power in both India and China. However, allocating mines for Captive use preferably to the existing industries and for their expansion purposes where industries have close proximity to mines will solve some of the problems currently facing the industry. Speeding of allocation of mines and environmental clearances are necessary. Bringing down the transaction cost and interest subversion are important to boosting exports of bulk alloys by India.

Asian Metal: How about suggestion to industry operators and what should the market expect in the short and medium-term?

Raghunath: Global economy is weak and there is no hope of recovery for at least two years. High debts ruin prospects of many companies. One should be cautious on making investment in this gloomy period.

Asian Metal: Any other areas you may want to pass comments?

Raghunath: Estimated trade deficit in India is between $193billion and $196billion in the last fiscal year 2012/2013. Exports declined in 2012/13 in comparison to previous year. India's economic growth stood at 4.5% in the third quarter (Q3) of 2012/13, its weakest in the last 15 quarters. India’s growth rate for 2012/13 is pegged at 5%, which is the lowest since 2002/03.

There are about 215 projects in sectors like power, coal, steel and roads with an investment outlay of about $130billions that are currently stalled in India. Capital market is in not favorable towards infrastructure companies and Private Equity has been scarce, thereby creating big latitude for banks in selective lending.

Indian government acknowledges that boosting investment in infrastructure would help revive the slowing economy and has set a target of INR 51 Lakh Crore ($1trillion) of investment in the 12th Five-Year Plan (2012-2017) against the INR 27 Lakh Crore ($500billions) invested in the previous five-year plan period.

Our Honourable Prime Minister is a renowned Economist and our Honourable Finance Minister is efficient with vast experience. Therefore we hope in the future our country overcome hurdles and achieve sustained growth.

I am thankful for granting this opportunity.