Neelachal Ispat Nigam Limited (NINL), jointly promoted by the MMTC Ltd and Orissa government, will start producing steel from its 1.1 million plant at Kalinganagar in Jajpur district in 2012, after the completion of its phase-II expansion.
The expansion project is expected to be finished by October this year. However, the company officials said, after the trial running of the plant, it would take few months to find and rectify errors.
“We hope by the first quarter of 2012, we can start the commercial production of steel with full capacity,” said P C Sahu, managing director, NINL.
The company has been producing pig iron and other by-products so far, since its inception in 2002. Last year, it produced 573,375 tonnes of pig iron, out of which, 522,394 tonne were sold.
For the phase-II expansion, the company has earmarked a budget of Rs 1,855 crore, out of which Rs. 848 crore has been spent. This initial investment was funded from internal accruals, issue of bonds and bank loans. NINL currently has a debt to equity ratio of 1.6 to 1.
MMTC has so far infused around Rs 400 crore equity for its 49.48 per cent stake in NINL. The government of Orissa holds 26 per cent through Industrial Investment Promotion Corporation (IPICOL). The balance stake is held by banks and equipment providers, said H S Mann, chairman, NINL and managing director, MMTC Ltd.
NINL intends to source iron ore from its mines by next year as all necessary clearances for exploration has been received. The company is waiting for stage-I and stage-II forest clearances, which it expects, would come by January 2012.
“Once NINL starts using its own iron ore resources, the cost of production will come down significantly and margins will rise. At current prices, it is unviable to produce steel”, said Mann.
NINL has been granted mining lease by the Orissa government over 872 hectares in Sundergarh and Keonjhar districts. The mines have an estimated reserve of 110 million tonne of iron ore.
The company is currently depending upon MMTC and state-run Orissa Mining Corporation (OMC) for iron ore supply.
Since its inception, there have been talks of merger of NINL with Steel Authority of India (SAIL). Mann said, the talks between parties concerned are at very initial stage.
“There have been several evaluations of NINL properties by different agencies, but the parties have not agreed to a single valuation. There are disagreements regarding valuation of the property, but we will sort it out,” he said.
