The Hindu Business Line : Bullish market keeps SAIL plants on growth track

RIDING on a bullish steel market, all the four integrated steel plants of Steel Authority of India Ltd (SAIL) have recorded substantial growth during 2003-04.

The company succeeded in wiping out its total accumulated loss of Rs 2,765 crore and registered its highest-ever net profit of Rs 2,512 crore on a turnover of Rs 24,178 crore. While the two big and established players — Bhilai and Bokaro — continued with their growth performances, the weaker ones — Durgapur and Rourkela — registered turnarounds.

These plants made the best out of a bullish steel market. Durgapur Steel Plant (DSP) was successful in returning to the black after a gap of over two decades. It registered a net profit of Rs 4.52 crore in 1981-82. Losses went up to Rs 247 crore in 2002-03. But in 2003-2004, it clocked a net profit of Rs 81.25 crore.

Rourkela Steel Plant (RSP) succeeded in jacking up its turnover by 25 per cent to Rs 3,940 crore but failed to reach the profit zone. However, it reduced its net loss from Rs 593 crore in 2002-03 to Rs 109 crore in 2003-04.

A senior RSP official said, the plant might have ended with a profit had it not made several provisions. "We thought it is the right time to make provision. We could have pushed it for the next year but that would have been a provident act", he said.

The company, however, registered a significant amount of cash profit during 2003-04, after almost seven or eight years, the official added.

Bhilai Steel Plant, which is considered to be the flagship unit of SAIL, recorded its highest-ever net profit of Rs 1,932 crore, marking a growth of 132 per cent over the previous fiscal. Turnover also increased by 36 per cent to end at Rs 8,850 crore.

Similar is the case with Bokaro Steel Plant. The plant registered a net profit of Rs 1,120 crore during 2003-04, which is three-and-half times more than that of Rs 311 crore recorded in 2002-03. It is also nearly 40 per cent highest than the previous best of Rs 806 crore registered in 1995-96.

Some factors, apart from the bullish market trends, helped the plants to excel in this manner. First, was the reduction in manpower. SAIL reduced its manpower through voluntary and natural retirement during 2003-04. Its present workforce is down to 1,31,910.

Similarly, individual plants had also reduced staff strength. This had helped the plants in improving profitability.

The second important factor was drastic reduction in interest burden. All the plants gained immensely from the regular capital restructuring exercises. As a result, the annual interest and finance charge of the four plants dropped in the last fiscal. It is expected to fall further during 2004-05.

The average capacity utilisation of all the four plants gained significantly during 2003-04 over the previous fiscal because there was a constant demand for steel items. While Bhilai and Bokaro plants functioned well above their rated capacities, the other two almost reached their peaks.

The average capacity utilisation would have improved further if the coking coal crisis could have been averted. According to officials of the four units, the crisis forced the plant management to cut down production during the last quarter.