BHP BILLITON IN INDIA
BHP Billiton has been doing business with India for over 30 years; its initial involvement was through technical and training agreements with the Steel Authority of India Limited, SAIL.
However, the relationship broadened considerably through the 1980s and 1990s, when BHP Billiton began exporting increasing tonnages of metallurgical coal to Indian customers. At the same time, it also entered into importing arrangements with Indian iron ore producers in order to mix their product with West Australian ores prior to exporting to East Asia. BHP Billiton is also a major supplier of energy coal into the Indian market, mainly destined for the cement sector.
In addition to building trading arrangements, with the gradual opening up of the Indian foreign investment regime, BHP Billiton started to explore mineral and petroleum investments. After establishing a full representative office in 1994, BHP Billiton began to explore opportunities in base metals, iron ore and diamonds. However, only recently have these opportunities become more concrete as the exploration licence and mineral concessions regime improved and fiscal terms for oil and gas exploration have developed to world class standards. BHP Billiton’s
interest in potential domestic coal mining developments awaits substantial changes in the regime governing private sector entry, especially passage of the Coal Mines (Nationalisation) Amendment Bill.
Another priority for BHP Billiton in India is to establish a position as a significant supplier of natural gas via both liquefied natural gas, LNG and pipeline developments. BHP Billiton recently received a mandate from the Iranian government to lead the feasibility study and subject to viability, the ultimate development of a major gas pipeline from Iran to India via Pakistan.
In general, BHP Billiton maintains an opportunistic view on divestments of Indian government enterprises and approaches each on a case by case basis. BHP Billiton believes business success in India depends on several factors including patience and relationship building. It is also important to have an appetite for India as a long term proposition, with a company needing clear vision to adapt and stay for a long period. BHP Billiton also believes Australian branding and a reputation as fair players is significant, but at the same time it is imperative to be perceived as and increasingly operate as, an Indian company and not a ‘non adaptive’ global corporation.
While encouraged by the gradual opening of both the economy and the minerals sector, BHP Billiton notes there is still a considerable way to go in these efforts. It notes the business environment can be trying, where red tape, infrastructure, labour issues and overlapping jurisdictions between central and state governments can cause considerable delays and frustration. In the minerals sector, BHP Billiton has found some states, particularly Rajasthan, Karnataka and Andhra Pradesh, have recently implemented far more progressive and investor friendly policies, something that is reflected in the number of licences granted in these states compared to other mineral rich states. These policy developments see BHP Billiton looking more favourably at the potential of India as both a market and as a place to invest, albeit at a steady pace.
Source: BHP Billiton, 2001.