The modernisation of Bokaro Steel plant (BSL) has neither achieved its objective nor improved its financial position after an investment of nearly Rs 2,346.45 crore, compared with its position before the modernisation, the Comptroller and Auditor General of India (CAG) has said in its report.
Due to radical changes in the steel sector consequent upon liberalisation of the Indian economy in 1991-92, the investment in stage-I of the modernisation programme of BSL had not yielded results.
The net sales realisation envisaged at the time of approval by Government of India in July 1993 had come down in absolute term also during last eight years due to excess capacity in flat products in the country.
Fall in international prices of hot rolled coils and import restrictions on steel exports to some countries aggravated matters. Although much care was taken to formulate a policy for modernisation, SAIL did not take into account crucial factors such as likely competition it would face in subsequent years. It also assumed 100 per cent capacity utilisation and full net sales realisation by taking the marketability of the products for granted while doing the sensitivity analysis for evaluating the scheme.
As a result, when foreign manufacturers swamped the Indian market and dumped the quality steel products at cheaper rates, BSL did not have any option but to close down one blast furnace (no.-5) and two coke oven batteries for want of demand. Further, due to creation of surplus indigenous capacity for flat products in view of the entry of private sector, sale realisation had declined.
According to the report, the modernisation programme of BSL which was conceived in 1987 so as to encompass entire mid-stream facilities like the two steel melting shops (SMS) besides introduction of continuous casting facilities in both SMS units and upgradation of hot strip mill.
These have not been completed fully so the envisaged benefits have not accrued to the plant.
Though the original proposal approved by the SAIL board in February 1990 aimed at modernisation of BSL in two stages at a cost of Rs 1,600 crore, even the stage-I of the modernisation programme had not been completed till the date the CAG report was prepared.
