New Delhi, May 22: The government today approved the merger of Sponge Iron India Ltd (SIIL) with NMDC, a mining firm.

The merger of the two public sector enterprises under the ministry of steel will be carried out within six months, finance minister P. Chidambaram told newspersons, after a cabinet meeting.

“The merger will take place through the acquisition of SIIL shares by NMDC,” Chidambaram said.

The move would ensure supply of iron ore, internally, to SIIL’s unit at Paloncha in Khamman district of Andhra Pradesh, he added.

NMDC is the largest miner of iron ore in India.

Sponge Iron has been facing an acute shortage of iron ore because of limited supplies and high raw material prices.

During 2006-07, SIIL made a profit of Rs 7.5 crore on an income of Rs 56 crore.

“The merger will also help in implementing SIIL’s new plant by utilising its surplus land and manpower and NMDC’s financial resources,” Chidambaram said.

The government today also said the expansion of Steel Authority of India Ltd and Rashtriya Ispat Nigam Ltd was on track.

These steel PSUs will nearly double capacity by 2010 at a cost of Rs 63,000 crore.

The cumulative profit of all public sector firms under the ministry of steel has grown nearly four times to Rs 20,624 crore, and their contribution to the exchequer has nearly trebled in the past four years, the ministry said.

The combined contribution of the firms to the central and state government exchequers has risen 237 per cent to Rs 19,649 crore in 2007-08 from Rs 5,829 crore in 2003-04.