The Hindu Business Line : Vizag Steel plans capacity expansion

Looking ahead
Expansion project to cost Rs 9,000 crore; funds to raised through internal accruals and debt.
Importing iron ore through a deep draft port near the steel plant was being explored,

Ambar Singh Roy

Kolkata, Oct. 16 Rashtriya Ispat Nigam Ltd is on track to expand its capacity from three million tonnes per annum (mtpa) at present to 6.8 mtpa by 2010. While orders have been placed for all major equipment required to ramp up capacity to 6.3 mtpa, an additional 0.5 million tonnes capacity will be added by way of “additions, modifications and replacement projects”, according to Mr P.K. Bishnoi, Chairman and Managing Director of RINL.

Speaking to Business Line recently, Mr Bishnoi said Rs 9,000 crore would be required to implement the expansion project. This would be raised by way of internal accruals and debt. RINL already has with it a surplus of Rs 6,500 crore even as a further surplus of Rs 2,000 was expected to be generated within the next one year. Currently, RINL is a zero-debt company.

Mr Bishnoi said there had been some delay in the implementation of the expansion project since all equipment suppliers to steel manufacturers were heavily booked and were quoting longer delivery schedules than was anticipated earlier.

product mix

He said the company’s product mix would comprise long products, including construction steel and wire rods. A tie-up has been forged with National Minerals Development Corporation for ensuring iron ore linkages up to 6.8 mtpa production. “Beyond that, too, NMDC will make iron ore available to us,” he added. Long-term supply contracts with global coking coal majors were also being firmed up.

According to him, government policies had made it imperative to make iron ore available to domestic steel makers first. The prospect of importing iron ore through a deep draft port near the steel plant was being explored, Mr Bishnoi said, and added that the Gangavaram port would be ready by next year. When operational, the Gangavaram port can accommodate vessels of 2,00,000 tonnes-plus capacity.

Growth in demand

Mr Bishnoi said the elasticity of steel demand vis-À-vis the nation’s GDP was 1.2:1. As such, the growth in demand for steel would always be higher than the GDP growth rate. The National Steel Policy has outlined that per capita steel consumption in rural India, too, should go up from 2 kg at present to 4 kg by 2019-20.

“Today, the demand for steel in the country is more than the combined capacity of the integrated and secondary steel producers in India,” he said, adding that, by 2020, India would emerge as the second-largest producer as well as consumer of steel in the world.