Vizag steel plant plans to clear losses by next fiscal

Visakhapatnam Steel Plant (VSP) is planning to clear all its accumulated losses by the middle of next fiscal.

"During the last fiscal, we paid all our debts. The company now aims to wipe out its accumulated losses soon. A few years back, the steel plant's accumulated losses shot up to Rs 4,900 crore. It has now come down to Rs 1,000 crore which we expect to clear by the middle of next fiscal," Y Siva Sagar Rao, chairman-cum-managing director of VSP, told Business Standard.

The steel plant, which clocked a net profit of around Rs1,575 crore last fiscal, expects it to touch the 1,800-crore mark this fiscal. By the end of next fiscal, the steel plant also plans, for the first time, to pay dividends to the central government, he said.

VSP, however, is anticipating a slight drop in its net profit during the next fiscal due to the additional burden on procurement of raw material, Rao said.

"We have imported coking coal at $35-37 per tonne in 2003-04 whereas in 2005-05, we paid $59 per tonne. VSP has also signed agreements with a couple of Australian companies for the supply of coking coal for the year 2005-06 at $126.9 per tonne in addition to $30 freight charges per tonne. Prices of raw material like iron ore, limestone and coke too have shot up by 20 to 40 per cent," he added.

As VSP requires close to 30 lakh tonnes of coking coal every year, the company has to bear an additional burden of about Rs 900 crore to import coking coal during the next fiscal.

"Once we clear the accumulated losses, we should be able to pay the corporate tax on our profits. These factors, however, will have an impact on our bottomline during the next fiscal," he said.

To increase its profits, the steel plant is concentrating on increasing the production level through the existing plant and machinery.

"As of now, the plant is operating at 120 per cent capacity. The company is targetting to increase the liquid steel production by about one-lakh tonnes per year over the next three years without any additional investment on machinery," he said.

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Forging ahead

• VSP's accumulated losses have come down to Rs 1,000 crore which the plant expects to clear by the middle of next fiscal
• The steel plant also plans to pay dividends to the central government
• To increase its profits, the steel plant is concentrating on increasing the production level through the existing plant and machinery