The Steel Authority of India Ltd (SAIL) has decided to reduce production costs at all its plants and units by 10 per cent and improve asset utilisation to boost profit margin.
A SAIL source said here yesterday that the decision was taken in view of the market which could not absorb the increase in prices. The chief executives of all its plants have been asked to take initiatives to ensure that the results were achieved. They were asked to submit revised budget with 10 per cent cost-cut. The company held a directors workshop at Manali in which SAIL chairman Aravind Pande stressed on cost reduction, maximisation of revenues by increasing net sales realisation and sales of high value items.
Other points on which emphasis was given included improvement in customer orientation and quality, improved asset utilisation, timely completion of projects and increase in exports to earn more revenue. A board member of the company admitted that asset utilisation was a big problem in Rourkela and Durgapur, the two plants which had recently undergone massive modernisation involving nearly Rs 10,000 crore. The managing directors of the two plants were asked to take initiatives to produce results much faster. Stating that SAIL was most hard hit in the flat product sector with many new players entering the market with state-of-the-art technologies, he said the new hot strip mill at Bokaro, producing flats only, should have been commissioned by now. SAIL could not afford to concede ground to new players like Essar and Lloyds in hot rolled products, he said. SAIl would be able to compete with other rivals after the commissioning of the new hot strip mill.
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Admitting that the companys financial results in the first quarter was not encouraging, he said SAIL has set up a modest profit target of Rs 700 crore in the current year against Rs 523 crore in 1996-97. One of the major areas for cost reduction was economising the cost of raw materials, including coal, he said. SAIL had to bear an additional Rs 600 crore due to hike in coal price last year. It was decided in the workshop that a special cross-unit team headed by G S Garcha, director of raw material division (RMD), would assess company-wide opportunities to economise on raw material costs within each of the plants.
Sources in RMD said efforts were being made in each plants to cut down coal consumption level which would save around Rs 300 crore alone on account of coal.
Sources said the company has also identified exports as an important area for earning more revenue and greater utilisation of assets. For producing results in all these five areas faster, the company needed to improve teamwork and continuous learning from our own successes and failures as well as from the experiences of other organisations. SAIL has concluded its talks with Coal India Ltd (CIL) for the supply of coal in the current year.
The company, which laid emphasis on quality, would take about 8 million tonnes (mt) of coal from CIL in 1997-98, involving over Rs 1,400 crore. Bharat Coking Coal Ltd would supply 4.15 mt, Central Coalfields Ltd 3.4 mt besides 0.37 mt would be supplied by Western Coalfields Ltd, sources said.