| On the anvil
New Delhi, April 10: The cabinet is likely to clear a Rs 8,250-crore expansion programme for Vizag steel plant.
The company will expand its output from 3.4 million tonnes to 6.3 million tonnes by setting up a new blast furnace and new facilities for value-added steel production.
The finance ministry has already agreed to the cabinet note, which is now being circulated among other ministries.
About Rs 2,500 crore will be raised as term loans from institutions, while Rs 5,750 crore will come from internal accruals.
Rashtriya Ispat Nigam Ltd (RINL) is poised for a turnover of Rs 8,181 crore, its highest since inception, for the previous financial year.
'With the steel maker posting good profits, the government feels it will be in a position to raise resources necessary for expansion,' steel ministry officials said.
'The debt market is reasonable. Vizag steel should have no problems in raising the debt either in rupees or in foreign currency loans. We would prefer to see them take the second option,' they said.
An organisational revamp has been set in motion in anticipation of the expansion. Former commercial director Y. S. A. Sagar Rao was made chairman of RINL late last year, while executive director - marketing H. S. Chatwal has been promoted as director (commercial).
Chatwal is known to be close to Rao and the two are expected to work in tandem. Rao and Chatwal are both seasoned steel professionals with experience in areas like corporate affairs, planning and production and are expected to give a push to the expansion programme.
The expansion plan is expected to be pushed within 36 months of the cabinet approval.
The expansion mainly aims to increase production of long steel despite the fact that the flat grades are fetching high prices. Vizag steel estimates the demand for long products will continue to zoom in the long run.
However, a second expansion, geared to take the capacity to 10.2 million tonnes by 2012, will focus on flat products.
The state-run steel company is on a hunt to set up joint ventures with foreign mining firms in Canada, Australia and Colombia to source quality coking coal. It is also trying to explore the possibility of gaining iron leases in neighbouring Orissa and Jharkhand for its ore supplies.