Steel Authority of India (SAIL) today drew flak from the newly-promoted steel minister Beni Prasad Verma for around Rs 2,000 crore cost overrun in the state-owned firm's Burnpur project.
SAIL is setting up a three million tonne steel plant at Burnpur in West Bengal with an outlay of around Rs 14,000 crore.
Initially planned to commission the facility by June this year, it got delayed due to a prolonged digging work at the plant site due to "difficult" and "unforeseen" soil conditions.
"I am not satisfied with SAIL. The Rs 2,000 crore cost overrun is huge. Why didn't they take precaution?" Verma said in his first press conference after being elevated to the Cabinet rank.
SAIL chairman C S Verma, who was present at the conference, attributed presence of molten material for delay in completing the digging work.
"We had to dig out the molten material (which took time) and in fact, we have got Rs 100 crore by selling them. Our initial plan was to start the plant by June 2011. However, by December, major facilities will be operational at the plant," SAIL chairman said.
Speaking to reporters later, he said: "The level of expectation (of the ministry) from us is very high. Our level of improvement has to pick up and we need to step up effort to bring that on line".
SAIL has embarked on a Rs 70,000 crore capacity expansion plan, including Rs 10,000 crore for the development of mines, to increase its capacity to over 24 million tonnes per annum (mtpa) by 2012-13 from 14.6 mtpa now.
The Chairman said that apart from the Burnpur plant, no other plant has been facing cost or time overrun and by the end of 2012-13, the hot metal capacity of the company would reach the targeted level. Two blast furnaces will start in the current fiscal taking the capacity to 20 mtpa.
However, time and cost overruns are not just confined to the company's Burnpur plant. The much-hyped follow-on public offer of the Maharatna firm has also got delayed due to some reasons or the other since last year.
It started with the problem of merchant bankers. As soon as the issue was sorted out, the market took a bearish turn and SAIL did not want to take the risk fearing the FPO may not yield the desired result.