The Hindu Business Line : Steel Ministry to back SAIL for stake in Neelachal Ispat

STEEL Authority of India Ltd (SAIL) has expressed interest in picking up a stake in Neelachal Ispat Nigam Ltd (NINL). The move is backed by the Union Steel Ministry.

A 1.1-million-tonne pig iron joint venture between MMTC and Orissa Government, NINL is expected to complete its first year of operation in 2004-05 with a net profit of over Rs 200 crore. The company, which has been given a high quality ore block, is now working on a Rs 500-crore project to add to its steel making capacity.

Sources in the Union Steel Ministry said that SAIL would shortly submit to the Committee of Secretaries a formal proposal for picking up a strategic stake in NINL. SAIL has discussed the issue with the Ministry. While SAIL authorities were not available for comment, sources in Neelachal Ispat confirmed the move.

Rashtriya Ispat Nigam Ltd, better known as Vizag Steel, had submitted a similar proposal at the end of 2004, expressing an interest to invest up to Rs 2,000 crore in NINL. Ministry sources confirmed that the bid would be reconsidered in view of SAIL's latest proposal.

It may be mentioned that MMTC, the majority partner in NINL, has been trying since early 2004-05, to rope in a strategic partner in the joint venture to expand the capacity to four million tonne. The initiative was in accordance with the original project proposal.

While a host of companies, including global major Posco and Tata Steel, had expressed an interest in the project, the MMTC authorities favoured floating an open tender seeking 51 per cent equity participation.

The move was approved by the NINL board with support from the lenders' consortia, including IDBI and the State Bank of India. A detailed proposal was also prepared in this regard by A.F. Ferguson. As a precursor to the open tender, the company carried out corporate restructuring by merging a group subsidiary Konark Met Coke Ltd with itself.

Though initially it had favoured the move, the Orissa Government finally opposed it fearing a political backlash to the associated `disinvestment.' As a consequence, MMTC was forced to roll back its plan for the open bidding route.

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