Vizag Steel zeroing in on consultant for its expansion plan

Mecon, Dastur & Co emerge front-runners

Visakhapatnam Steel Plant (VSP) is finalising the appointment of a consultant to prepare a feasibility report for the first phase of its Rs 3,000 crore capacity expansion plan.

"The expansion proposal was cleared by the VSP board recently and we have invited renowned consultants to prepare the feasibility report. Dastur & Co and Mecon are in the race and in the next one or two weeks, we will select one of these two for preparing the feasibility report," B K Panda, chairman and managing director, VSP, told Business Standard.

"Out of our total 30-lakh tonne steel production during the last fiscal, the share of value-added steel production was around eight lakh tonnes. This year, it will touch 10 lakh tonnes and after the expansion, close to 20 lakh tonnes will be value-added steel products," Panda said.

The value-added products are expected to increase revenues between Rs 1,500 and Rs 2,000 per tonne when compared to ordinary steel products, he said.

VSP has decided to expand the production capacity by another two million tonnes from the existing three million tonnes, with an investment outlay of Rs 3,000 crore.

"Most of our financial requirements for the expansion project will be generated through internal resources only and if necessary we can access institutional funding. It is likely that VSP will begin capacity expansion work during the next fiscal and it will take two-and a-half to three years to complete the expansion work," Panda said.

"After the expansion, VSP's iron ore requirements will increase from the existing 6.2 million tonnes to eight million tonnes per annum. Keeping this in mind we are taking initiatives to acquire our own captive iron ore mines in Orissa and Chhattisgarh and by the end of this fiscal we may finalise at least one mine," he said, adding, "We may invest about Rs 500 crore to open the mines over the next two years but our ore procurement costs will come down significantly and in the long run the plant will benefit massively with the captive mines."

VSP has started negotiations with about 8-10 Australian mine companies to acquire equity in one or two coal mines in Australia, which would ensure assured coal supplies for the steel plant's needs, he said.

"One Canadian coal mining company has agreed to lease coal mines but it is not feasible With a three-million tonne production capacity, we need to import three million tonnes of coking coal. We are also taking steps to use gas as a fuel which will bring down coal consumption. So even if our capacity increases to five million tonnes after the expansion, our existing coal supplies will sufficient to run the plant," he said.