Financial Daily from THE HINDU group of publications
Tuesday, Aug 27, 2002
Industry & Economy
MPs seek review of fresh investment plans of KIOCL
KOLKATA, Aug. 26
A SECTION of Members of Parliament cutting across party lines has expressed serious reservations over the proposed fresh investments by Kudremukh Inron Ore Co Ltd (KIOCL), shortlisted for disinvestment. The profit-making KIOCL has planned to make additional investments through Kudremukh Iron and Steel Co (KISCO) on new ventures for making pig iron and ductile iron (DI) pipes.
The MPs, according to sources, have also expressed doubts over the contention that there was considerable availability gap of DI pipes in the country. They have urged the Steel Ministry to review the matter, suggesting that such investments should not be allowed.
KISCO is a joint venture between Kudremukh Iron Ore Co Ltd (KIOCL), Metallurgical and Engineering Consultants (Mecon) and Metal Scrap Trading Corporation (MSTC), and operates a blast furnace with a capacity of 350 cu.m to manufacture 2,27,000 tonnes of high-grade pig iron per annum using the pellets from KIOCL's pelletisation plant.
A portion of the pig iron produced is now planned to be used for manufacturing 50,000 tonnes of DI spun pipes per annum. KISCO, citing a good market for DI pipes, has now proposed to set up a DI pipes unit ostensibly to reduce the losses being incurred on sale of pig iron at the moment.
As per information available, the Finance and Steel Ministries are also not fully agreed on the fresh investment plans of KISCO. While the Steel Ministry has supported the plan for investment of nearly Rs 100 crore on the proposed DI pipes unit by KISCO, the Finance Ministry, sources point out, has not fully favoured such investments.
KIOCL, already shortlisted for disinvestment/strategic sale of the Government's stake in the company, is the country's largest 100 per cent EOU engaged in mining and pelletisation with a capacity of 6.8 mtpa of iron ore concentrate and three mtpa of iron ore pellets. Seeking a review of the future expansion plans of KIOCL, the MPs have also sought a fresh look into the proposal to merge KISCO with KIOCL.
Sources indicate that the amalgamation of KISCO with KIOCL may allow the reserve fund of KIOCL to be utilised to prop up the loss-making KISCO. KIOCL, a blue chip PSU, has been making profits despite running into problems of extension of its mining lease on environmental considerations. It is pointed out that if KISCO is allowed to merge with the profit-making parent, this may substantially erode the profitability of KIOCL.
A faxed query by Business Line to Mr S. Murari, CMD of KIOCL, seeking a clarification on this issue did not evoke any response. A query on the viability of the proposed 2.5 lakh-tonne coke oven unit (estimated to cost Rs 131 crore) at Karvar, considering the high cost of imported coke, also did not fetch any response from KIOCL. The company is also planning to set up a 70,000-tonne DI pipes unit at an estimated cost of nearly Rs 150 crore.
Questions have been raised over the viability of this DI pipes venture, considering the investments that have to be made and the reported overcapacity situation (for DI pipes) in the market. Asked to comment on the overcapacity situation, Electrosteel Castings, a major player in the DI pipes sector, declined to say anything.
According to people in the know, the Union Government, as a matter of policy, generally does not permit heavy investment in a company shortlisted for disinvestment, unless the investment is required to increase its disinvestment value. KIOCL's plans for fresh investment, it is feared, may actually diminish its disinvestment value.
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