Road ahead

New Delhi, May 3: Indian Iron & Steel Company's merger with SAIL, coupled with a subsequent increase in its capacity, may finally be cleared later this month.

A recent meeting on infrastructure projects, chaired by Prime Minister Manmohan Singh, decided to place the merger among priority projects that need to be taken up in view of the rising demand for steel and to arrest the slowdown in core sector growth.

Sources said the steel ministry, which has already circulated a draft cabinet note on the IISCO merger, will now place it before the cabinet.

The Planning Commission had raised questions on the cabinet note seeking the merger, advising instead that IISCO should be ?offered similarly to other players? and adding ?SAIL could still acquire IISCO if it bids at a high enough price.?

However, sources said this suggestion has not been accepted by the ministry as IISCO is not directly owned by the government, but rather by SAIL. Any decision on the sale or merger should be initiated by SAIL. However, since the value of the merger is high, it requires cabinet approval.

Secondly, the ministry felt it would be extremely anomalous if SAIL were to offer IISCO for sale in the market and then send in a bid for the shares it already owns. SAIL had earlier tried to sell IISCO but could never find suitable buyers. This also weighed on the decision to go ahead with the merger proposal.

With the Prime Minister?s meeting agreeing to place the merger among priority projects, the proposal is likely to have easier clearance from the cabinet when it comes up for discussion later this month.

The note for IISCO merger is based on the government?s belief that with steel prices riding an all-time high, and IISCO coming back into the black after decades, this is the right time to merge the firm with SAIL and try revive it. Steel prices have increased by 250 per cent over the last two years and IISCO, which turned in a Rs 27-crore profit after 30 years last fiscal, is expected to nearly double its profits this time round.

Although the note does not state it, there is another reason for the hurry. The BJP-ruled Jharkhand government is trying to grab back three extremely valuable mining leases which form the core of IISCO?s Chiria mines.