Steel consumption during the first half of this months showed a rising trend, indicating market stabilisation in response to the budget and availability of money in the market through the capital market route.
Rashtriya Ispat Nigam Ltd chairman & managing director J Mehra said the Visakhapatnam Steel Plant had registered a 35 per cent increase in domestic sales during the period. With the government targeting a growth of 7 per cent in the gross domestic product, he said, steel consumption could grow at 8-9 per cent.
In an interview to Business Standard in Visakhapatnam on Sunday, Mehra admitted that the inventory pile up of 1.62 million tonnes of saleable steel with the main producers, despite a 36.6 per cent growth in exports, was a cause of concern for the producers as well as the steel ministry. He expressed the hope that this trend will be reversed with a spurt in construction activities and investment decisions, especially in the infrastructure sector.
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Mehra, however, said the stock pile up may continue to haunt the producers of flat in view of the sluggish growth in the white goods sector. The working group on steel for the ninth plan has suggested a minimum 4-5 million tonnes of flats to be exported. The report of the Sengupta Committee set up to identify the organisational and policy support required for exports is with the steel ministry.
On the just cleared Rs 984 crore expansion plan of Visakhapatnam Steel Plant, Mehra said the capacity augmentation by 1 million tonnes would be achieved in two phases. In the first phase, the existing 3 million tonnes liquid steel capacity will be stepped up to 3.5 million tonnes by 1998-99 at a cost of Rs 260 crore. In the second phase, to be completed by the year 2002, the final capacity of 4 million tonnes would be achieved at an additional investment of Rs 715 crore.
Mehra said funds would not be a constraint. The bulk of the finances will come from the plants internal accruals while Rs 335 crore will be sought from financial institutions and raised through bonds. He disclosed that the Unit Trust of India had intimated him earlier this week its in-principle acceptance of the companys request for a two-year rollover of Rs 290 crore loan repayment.
Rashtriya Ispat had obtained a loan of Rs 530 crore in 1991-92 from UTI of which the principal component of Rs 290 crore was due for repayment in 1996-97 and 1997-98. This will be rescheduled by a two-year rollover so that it could be paid in 1999-2000 when a substantial part of the expansion would be over.
Rashtriya Ispat has also requested the government for a holiday on repayment of interest on loans, and a moratorium on repayment of principals on loans obtained between 1994-95 and 1998-99, when the first phase of expansion will be through.
For the second phase of expansion, Mehra expects a suppliers credit of Rs 104 crore. A consortium of financial institutions will fund the expansion to the extent of Rs 335 crore. SBI Capital Markets, Industrial Credit & Investment Corporation of India and Industrial Development Bank of India have been asked to study the funding options.
The Rashtriya Ispat chief said that apart from the Rs 984 crore expansion, Visakhapatnam Steel Plant would require another Rs 535 crore for modernisation and replacement programmes under its corporate plan for 1997-2002, pushing up the fund requirement to Rs 1,519 crore. Naturally we have to look at all sources, including foreign financial institutions, for soft loans, he said.