New Delhi, May 27: Steel Authority of India Ltd (SAIL), which has undergone a major restructuring over the last few years, hopes to report a profit for the first time after five years this fiscal. It also plans to invest about Rs 1,900 crore over the next two years to modernise its steel plants. The investment, entirely from internal accruals, is the largest by SAIL since its high-cost modernisation binge in the early 1990s.
SAIL chairman V. S. Jain told The Telegraph: “We hope to post a profit of about Rs 500 crore this fiscal (2003-04) on a turnover of Rs 20,000 crore.”
The steel behemoth is set to announce lower losses of about Rs 320 crore on a turnover of over Rs 19,000 crore for 2002-03 on Wednesday.
Jain, as SAIL’s finance head in the past, has been largely responsible for the restructuring of the company. “Things are looking better. Even flats, where there was over-capacity in the industry, have now started yielding better price realisations,” he said.
SAIL also plans to cut workforce by about 6,500 through a voluntary separation scheme to be announced this July. This move too is expected to send ripples through the five steel cities that SAIL has set up in the east. Almost 1.3-lakh workers live and work in these steel cities.
The former blue-chip started sinking into the red in 1998-99, when it ran up losses for the first time. The company suffered a loss of Rs 1,574 crore that year, forcing the government to sit up and order a restructuring based on a study by McKinsey & Company. Next year, SAIL’s losses went up to Rs 1,710 crore. However, losses came down to Rs 728.66 crore in 2000-01, mainly on account of sale of idle assets and non-core activities. However, heavy interest and depreciation costs saw losses again shoot up to Rs 1,707 crore in 2001-02.
Jain said, “The market is tougher now.” SAIL is expecting three of its plants to make a profit this fiscal — Bhilai and Bokaro, the usual cash cows, as well as the perennial loss-making Durgapur Steel Plant (DSP). DSP has not made a profit since 1982, but SAIL hopes to change that with a different product-mix and strategic investments in casters and furnaces.
Rourkela, another loss making unit, is expected to report cash profit this year while Alloy Steels Plant, Salem, and Visvesvaraya Steel may run up losses of about Rs 300-350 crore, about Rs 100-150 crore lower than normal.
One of Jain's principal tasks in the last fiscal has been to cut down SAIL’s huge interest pay-outs by taking advantage of lending rate cuts by banks. In 2001-02, SAIL paid some Rs 1,562 crore in interest alone. “We have cut down on our cost of borrowing by one and a half per cent and it now costs us about 9.5 per cent on an average to service our debt,” he said.