New Delhi, June 9: The government is considering creating two behemoths ' one by merging the state-run steel companies and another by uniting the iron ore mining PSUs.
The steel ministry runs two iron ore mining companies ' Kudremukh Iron Ore Company and NMDC. The two firms together produce about 45 million tonnes (MT) of iron ore annually. By contrast, the output of BHP Billiton ' the largest producer of iron ore ' is nearly 100 MT a year.
Steel minister Ram Vilas Paswan said the government was considering the step to promote economies of scale. According to analysts, the two sectors have large conglomerates globally and small standalone firms rarely succeed.
Paswan said Steel Authority of India’s (SAIL) merger with Indian Iron & Steel Company Ltd would get the cabinet nod when it meets next and the process should be through by October. He, however, said the proposal to merge Rashtriya Ispat Nigam Ltd (RINL) with SAIL would take more time.
The Andhra Pradesh government’s opposition to the plan is becoming a stumbling block to the mega merger.
However, officials said any merger of steel PSUs will also mean merging Rashtriya Ispat Nigam with SAIL. They added that such a merger would mean SAIL taking under its wing not only IISCO and RINL but also Sponge Iron India Ltd and MMTC's Nilachal Ispat. The new entity, once created, would have a combined steel production of 17.4 MT.
Paswan said the consolidation being considered was part of an overall strategy to increase steel output to 65 MT by 2012. A vision plan to be drafted by a panel ' which will be appointed soon ' on National Steel Policy will also echo this. He asked steel producers to hike output by 10 per cent annually as part of the plan.
The government plans to invest Rs 25,000 crore in SAIL over the next five years to help push up steel output, he added.
Paswan said there were no plans to privatise any PSU under his ministry. He said revival packages for two PSUs ' Hindustan Steel Constructions Ltd (HSCL) and Bharat Refractories Ltd (BRL) ' were being drawn up. The government has appointed AF Fergussen as a consultant for HSCL, which has suffered a loss of Rs 96 crore in 2004-05. BRL was in the red by Rs 5.5 crore.