SAIL lines up Rs 12,300 crore for Nilachal Ispat Nigam

Public sector Steel Authority of India (SAIL) has earmarked an investment of Rs 12,300 crore for the merger of Nilachal Ispat Nigam (NINL), a joint venture between MMTC and Orissa government, in its corporate plan. Though the merger proposal is being stonewalled by the two major promoters on the ground of 'undervaluation'.

According to SAIL sources, if the merger takes place, the public sector steel behemoth would immediately invest Rs 2,300 crore to ensure that NINL achieves finished steel production of 1 million tonnes, as envisaged in the original plan of the project.

This investment includes fund infusion to operationalise the captive mine, thereby ensuring 2 million tonnes of iron ore a year by 2010-11. SAIL is also planning additional capacity of about 2.5 million tonnes a year, thus making NINL a fully integrated steel plant with a capacity of 3.5 million tonnes a year by 2015. SAIL has lined up Rs 10,000 crore as investment for this purpose.

These capital expenditure plans are over and above Rs 1,200 crore that SAIL is ready to pay for acquiring the company.

Meanwhile, the public sector steel company made a presentation on its outlook on NINL in a meeting convened by the department of disinvestment (DoD) in Delhi earlier this month. It projected the turnover of NINL to go up to Rs 2,500 crore by 2010 and to Rs 9,000 crore by 2015 from the current Rs 1,300 crore, following new investments and expansion. The taxes, duties and royalty currently being paid by NINL to the Orissa government would correspondingly increase by about 600 per cent from the current level, SAIL argued.

The company representatives further pointed out that the manpower of NINL was only 1,239 up to the pig iron stage, against the approved manpower strength of 2,000 employees for its 1.1 million tonnes per annum finished steel plant. However, after addition of the envisaged 3.5 million tonnes per annum capacity, the manpower strength will go up to 6,500 employees.

Significantly, the post-acquisition investment plans of SAIL have not impressed the two major shareholders of NINL, MMTC and the Orissa government, which are reported to be unhappy with the valuation of NINL shares.