SAIL to invest Rs 3,000 crore over 3 yrs

Fund to be utilised to increase capacity

Riding the ongoing steel boom, public sector Steel Authority of India Ltd (SAIL) plans to invest about Rs 3,000 crore over the next three years as part of efforts to expand production capacity to 20 million tonne by 2011-12 from the present 12 million tonne, its chairman V S Jain said.

The company also plans to ramp up the investments subsequently from its internal reserves as it strives to become one of the top ten steel makers in the world, Jain told the Business Standard.

"Our depreciation is Rs 1,000 crore every year. We want to plough it back into the company for expansion," Jain said.

The rest of the internal accruals would be used to correct the company's debt-equity ratio, which has been targeted to come down to 1:1 within a year from the present 2.5:1, he added.

The increased capacity would result from brownfield expansions at SAIL's four existing locations at Bhilai, Rourkela, Durgapur and Bokaro, Jain said.

It is worth noting that during the first nine months of the current financial year, SAIL has reported a profit of Rs 1,500 crore against a loss of Rs 500 crore for the same period of the previous financial year. According to Jain, the company's sale volumes have risen by 8 per cent during April-February 2003-04.

Jain said the steel market in the country would grow at a fast clip over the next few years, which would require additional capacity to be put in place by SAIL, the country's largest steel producer.

"The outlook is very good. We are very bullish and confident. There is real activity in construction and projects. We feel the demand for steel will grow by 7 per cent over the next five years," he said.

Though it plans to hike its production capacity significantly, SAIL also plans to prune its existing manpower of 130,000. "We think with a capacity of 20 million tonne, we should have a workforce of 100,000," Jain said.

SAIL had cut its manpower strength by 45,000 during 1998-2004 as part of various cost-cutting measures, which has resulted in 3.6 per cent low cost of production this fiscal compared with the previous year.

Jain said Rs 2,000 crore was saved this year through cost-cutting, energy conversation, improved product mix and lower interest cost.

SAIL is not the only steel producer planning to raise its production capacity. Tata Steel has already announced that it would increase its annual capacity to seven million tonne by 2007 and to 15 million tonne by 2010 from four million tonne at present.

This would be done through a combination of capacity addition at its existing plant at Jamshedpur and new operations in India or overseas.