Essar Steel plans Rs 700 cr capacity expansion

Essar Steel Ltd plans to invest Rs 600-700 crore to hike its production capacity of hot rolled coils by 29.5 per cent to 2.5 million tonne during this financial year.

The company would also boost its sponge iron capacity by 30 per cent to 3 million tonne by July this year, P R Dhariwal, director (commercial), Essar Steel, said.

The company also expects to start captive mining of iron ore in Chhattisgarh and Orissa this year after receiving the nod from the two state governments, Dhariwal said at the sidelines of a press conference here today.

The expansion, would, however, be subject to approval from the financial institutions as part of a restructuring exercise.

He said the company was awaiting a nod from the financial institutions before undertaking the expansion. As per the corporate debt restructuring plan, the company had committed that it would not undertake fresh investments for a fixed period of time.

"There is a restriction. We have already requested the FIs. The capacity expansion should happen," Dhariwal said.

On the iron ore mines, he said the company has applied for license to do mining at six sites in Chhattisgarh and Orissa for 15-20 years. The mines have total deposits of 1000 million tonne. The company, at present, sources iron ore from National Mineral Development Corporation.

Dhariwal said the rising cost of inputs like iron ore and gas was affecting the company's operations. The company procures natural gas from GAIL for its Hazira plant.

However, the lack of adequate supply has forced the company to use liquified natural gas from Petronet LNG even though it costs twice that of natural gas.

According to Dhariwal, the company has improved its productivity and has also implemented various cost-cutting measures. Essar Steel supplies its products to cold rollers, pipe and tube makers and shipping industry.