Why Mr Mittal is an NRI

While many Indians will take pride in how well people of Indian origin are doing overseas, right from the late Kalpana Chawla to the newly-crowned steel-czar Lakshmi Mittal, the question today is why Mr Mittal isn’t investing in his home country.

After all, if India is to grow at anywhere near the pace it is targeting, and if it is able to attract the kind of infrastructure investment that has been planned, the market for steel in the country can only explode.

Sure, this is not going to happen overnight, but then Mr Mittal’s the person who bought a decrepit plant in Khazakhstan over a decade ago to be able to catch the Chinese boom, and continues to snap up plants in the erstwhile Soviet Union since, once these countries become part of the EU, he’ll be able to sell at preferential rates to western Europe. So it’s possible to infer that Mr Mittal doesn’t feel as confident about India’s ability to take off.

Another argument for Mr Mittal’s absence is that he and his brothers in India have carved the world into mostly non-compete zones, and India’s one of them.

While this may have sounded plausible a year ago, of late both Mittal and his brothers have come up against each other while bidding for mills in eastern Europe—for the state-owned BH Steel in Bosnia and for a steel unit in the Philippines—which makes the non-compete argument implausible.

It is of course true that all the steel companies in India collectively produce just under half of what Mittal does (33 million as compared to 70 million), but his empire is made up of several moderately-sized mills.

More likely, Mr Mittal sees the heavy weather the government continues to make over the sale of loss-making steel firms like Iisco. As the latest World Bank report says, it still takes 89 days to register a firm in India and another 10 years to formally go bankrupt. The turnaround time in the country’s ports is dramatically down from 8.1 days in 1990-91 to around 2 days today, but this is still several times higher than Colombo’s few hours for instance.

In any case, if containers get clogged at the country’s ports for 10-12 days thanks to the fact that Concor has a monopoly over container movement by train and yet doesn’t have enough wagons, what’s the point of the productivity hike at the ports?

More important, from the point of view of someone interested in the core sector, Mr Mittal would have to deal with different state governments for mining rights of coal, chrome and iron ore, and so on. Since this is an area that continues to be fraught with allegations of favouritism and politicking, that’s another disincentive to investing in the country.