| The road to future
New Delhi, March 27: The Centre has moved a cabinet note that aims to clear the way for the long-planned merger of Indian Iron and Steel Company (IISCO) with SAIL.
Pushed by the BJP-led Jharkhand government's tough stand on the lease of iron-ore mines under IISCO and by Left lobbying, the steel ministry has sent the note to key ministries and to the Prime Minister's Office (PMO).
However, the document has some riders. One of them is that the government will not spend anything on the merger. This means it will have to turn down requests for helping IISCO clean up its messy debt slate.
SAIL, on its part, will have to ensure quick technology upgrade to make IISCO's Burnpur plant viable. The company's iron smelter at Kulti, one of the oldest in the country, was shut down some time back. It will be hived off soon.
The Centre has been hesitant on merging IISCO since last year, when Bengal chief minister Buddhadeb Bhattacharjee asked a private firm to look at buying the steel mill. Soon after, steel minister Ram Vilas Paswan told Bhattacharjee he would like to revive IISCO as a government entity but the Bengal government's overtures puzzled the Union steel ministry and delayed new proposals.
What clinched the issue was a rear-guard action by Left MPs opposed to Bhattacharjee' line on the sale of IISCO units. They seem to have piled pressure on the Centre to come out with the long-delayed cabinet note on the merger. However, two key demands ' handouts and debt write-offs ' have not been incorporated in the note.
The government believes that soaring steel prices and the improvement in IISCO's finances have created the right conditions for a merger of the company with SAIL. Steel prices have surged 250 per cent over the past two years and IISCO, which turned in a Rs 27 crore profit after 30 years in last fiscal, could double its profit now.
There is another reason, one the steel ministry note is silent on. The BJP government in Jharkhand is trying to grab three mining leases at the core of IISCO's Chiria mines.
The Centre is keen that these go to SAIL, which needs the ore for its expansion, and not to the state.
The Chiria mines have 2 billion tonnes of high-grade iron ore which, valued at current LME prices, are worth a staggering $250 billion.
The Jharkhand government wants the mines leased some 70 years ago returned to it so that it can farm them out to private entrepreneurs. The central government and SAIL are opposed to the move and the row has now reached the court.
The merger is seen as the first pre-emptive step by SAIL and the Centre in their fight for the control of Chiria mines. According to the note, the Board for Industrial and Financial Reconstruction's package of Rs 881 crore to revive IISCO can continue, though SAIL will try to improve it.