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Project lag hits selloff-bound SAIL

New Delhi, Aug. 24: Steel ministry officials are worried about the delays in Steel Authority of India Ltd’s modernisation and expansion projects at a time the PSU is gearing up for a 5 per cent stake sale offer.

According to the finance ministry’s Outcome Budget 2014-15, which tracks the project-wise outlays of various ministries and organisations, SAIL has missed project deadlines by four to six years.

SAIL officials plan to hold roadshows next month at New York, Boston, London, Singapore and Hong Kong to drum up investment for the proposed divestment.

Among the projects delayed is the Rs 16,408-crore expansion at Iisco, Burnpur, which was to go on stream in December 2010 but is now slated to be completed later this year.

A Rs 17,266-crore expansion at Bhilai Steel Plant, which has been delayed by three years, may be completed in June 2015.

Durgapur Steel’s Rs 2,865-crore expansion is lagging by three years and scheduled for completion by March 2015.

The Rs 6,325-crore expansion at Bokaro is likely to be over by December this year, again a delay of three years. The Rs 11,812-crore expansion at Rourkela, too, has been delayed by more than a year.

However, capacity expansion of the Meghataburu iron ore mine in Jharkhand to 6.5 million tonnes (mt) from 4.3 mt took the longest time. It was completed in June this year, a delay of six years.

The Prime Minister’s Office has given strict instructions to various departments to ensure that project delays, which lead to cost and time overruns, should be avoided at all costs. The Narendra Modi-government wants to minimise the delays as such expansions by state-run PSUs boost the flagging manufacturing growth.

A SAIL spokesperson said the expansion programmes at Burnpur and Rourkela were on track and would come on stream in September 2014.

SAIL has spent around Rs 22,000 crore in ramping up its capacity. It has lined up expenditure worth Rs 15,000 crore for the current fiscal as part of a Rs 70,000-crore expansion plan.

The steel ministry, however, is concerned about SAIL’s continual fall in profitability and is toying with the idea of bringing in a consultant.

Profits have dipped to Rs 2,616 crore last fiscal from Rs 6,754 crore in 2009-10.

Rising interest charges along with fluctuating coal prices and a slump in demand have hit the bottomline.

However, analysts said the PSU was clawing back. With the modernisation plan on course, cost increases will be checked and a new and better product mix will result in higher realisations.

For the quarter ended June 2014, SAIL reported a 17.5 per cent growth in net profit at Rs 530 crore compared with Rs 450.9 crore in the year-ago period, helped by an improved operating performance even as it was affected by lower other income and higher finance costs.

SAIL’s revenues in the June quarter rose 10.8 per cent to Rs 11,341 crore over the year-ago quarter. Input costs grew only 8 per cent partly on account of its upgradation efforts.

Coking coal price

Domestic steel players using the blast furnace may benefit from the continuing weakness in international coking coal prices even as iron ore continues to play spoilsport, rating agency Icra has said, according to PTI.

Coking coal prices have declined around 16 per cent in the first quarter of 2014-15 over the previous quarter, and the same contract prices have been rolled over in the second quarter.

 
 
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