New Delhi, June 16: The cabinet today formally cleared IISCO’s merger with SAIL.
SAIL, on its part, has finalised a restructuring plan for the Burnpur-based steel-maker that envisages a seven-fold increase in output to 2 million tonnes within five years, with a product range which compliments Durgapur Steel Plant’s.
“The cabinet today authorised the ministry of steel to permit SAIL to initiate the merger after the Board for Industrial and Financial Restructuring approves it,” finance minister P. Chidambaram told reporters today.
IISCO was referred to the BIFR after its net worth was eroded by half. The ageing steel mill has since managed to turn the corner and post a modest cash profit from 2003. However, IISCO still has Rs 954 crore in accumulated losses, which SAIL will have to absorb or leverage as the cabinet has remained silent on its write-off.
Within hours of the cabinet clearance, SAIL chairman V. S. Jain told The Telegraph that the state-run steel behemoth would soon clear a plan drafted by IISCO officials “to modernise and expand IISCO ... we will jack up output from the current 3 lakh tonnes to 2 million tonnes.”
Jain added that the plan would be evaluated and tooled in such a manner so as to build up a product portfolio that “compliments DSP”.
“The two steel mills are within a few hours drive from each other. We can’t have them competing, rather we need to create synergy,” he said.
After IISCO's expansion, they will rival each other in size but not in products. DSP, now a 2 MT plant, is likely to expand capacity to 3 MT by 2011.
IISCO's expansion will be based on a Rs 7,800-crore plan chalked out last month for consideration of the SAIL board. The plan was based on SAIL's assumption that IISCO's output should be increased by 6-7 times.
Around Rs 5,000 crore will be invested in Burnpur and about Rs 2,800 crore in IISCO's collieries and iron-ore mines. Chiria mines, Asia's largest ore reserves, will soak up a little over Rs 2,000 crore.
IISCO will invest in a 2,000-cubic-metre blast furnace, apart from renovating two blast furnaces, each of 1,170 cubic metres. It will also set up a coke-oven battery (besides the two existing coke-oven batteries). A new sinter plant and a continuous casting plant are also in the pipeline.
The government feels it is the right time to merge IISCO with SAIL and try to revive it as steel prices are at an all-time high and IISCO is back in black after decades. Steel prices have risen by 250 per cent over the last two years and IISCO, which turned in a Rs 27-crore profit in 2003-04 and a Rs 40-crore profit in 2004-05, is expected to nearly double its earnings this year.