The Hindu Business Line : SAIL, Steel Complex in pact for joint venture

Thiruvananthapuram, Feb. 8 The State-owned Steel Complex Ltd (SCL) is set to sign a memorandum of understanding with Steel Authority of India Ltd (SAIL) for floating a joint venture for production of TMT steel bars.

The proposal has already been agreed in principle and a couple of officials from SAIL have been working at the SCL facility in Kozhikode over the last six months to optimise the process parameters of the electric arc furnaces and the billet caster.

Capacity addition

The installed capacity has since been raised from 20,000 tonnes to 55,000 tonnes of molten metal a year, according to sources in the State Industries Department.

SAIL had recently extended a working capital assistance of Rs 5 crore to SCL for import of scarp metal to meet the additional requirement and the former is buying back the billets at market prices.

The joint venture proposal envisages 50:50 equity partnership between SAIL and SCL with the management control vested with the former. The State Government has commissioned a study for asset valuation of SCL, based on which the funding pattern of the joint venture will be finalised.

Bad patch

SCL had not been doing well for the past few years and consequently it had come under the purview of the Board for Industrial and Financial Reconstruction (BIFR). The State Government, which has of late been scouting for tie-ups with Central PSUs to revive ailing State units, approached SAIL last year with the joint venture proposal to put SCL back on the rails.

For SAIL, the proposal has come handy as it has been looking for a production base in the South to cater to the mounting demand for steel products in the region. It has already done a study on the feasibility of establishing a modern steel rolling mill at SCL for manufacture of TMT bars as also special steels.

Advantages

The sources said that the MoU with SAIL will facilitate SCL to come out of the BIFR fold and the State was considering ways to settle the liabilities of the company before the joint venture is formed. A core committee comprising three executive directors of SAIL and three top officials of the State Government has been constituted to work out the details of the joint venture.

The establishment of the rolling mill with a capacity of 50,000 tonnes a year is the second phase and it is estimated to cost around Rs 300 crore.