The Hindu Business Line : RINL focussing on special steels to boost income

Visakhapatnam, April 26 The Rashtriya Ispat Nigam Ltd (RINL) is shifting focus to special steels and, as a result, it expects to sell 18.27 lakh tonnes of value-added steel during 2007-08 which would be a 64 per cent increase over the previous year’s sales, according to Mr P.K. Bishnoi, Chairman and Managing Director.

At a press meet on Saturday to review the performance of the steel plant during 2007-08, Mr Bishnoi said despite the abnormal increase in prices of raw material such as coking coal the plant was likely to post excellent financial results.

However, he admitted that there was a slight dip in saleable steel production during the year to 3.07 million tonnes from 3.29 million tonnes in 2006-07. He said it was “a year of challenges and disruptions in raw material supplies, steep increase in input prices and other problems”.

But the plant could improve its financial performance as it focused on special steel production for improved sales realisation. “The plant is likely to post net profit of Rs 1,850 crore on a turnover of Rs 10,425 crore during 2007-08 as against Rs 1,363 crore during the previous year on a turnover of Rs 9,131 crore,” he said.

Dwelling on the problems faced by the plant during the year, Mr Bishnoi said there was disruption in supply of iron ore for some time and “the fact that special steel manufacture requires more time should also be taken into account. Repairs also had to be carried out to the blast furnaces during the year and that also explains the slight slump. But still the plant is functioning well above its rated capacity and we have met the ministry’s targets.”

Expansion

On the expansion front, he said orders worth Rs 5,600 crore had been placed during the year, taking the total to Rs 10,728 crore.

He said the cost of expansion, originally estimated at Rs 8,600 crore, had increased by about Rs 2,000 crore, but “there is no problem. The RINL is in a position to finance the expansion and, if necessary, it can borrow from the market the additional amount.”

He said the equipment for the third blast furnace had been imported and work was proceeding briskly.

The additional capacity would be available by February 2010, taking the plant’s total capacity to 6.3 million tonnes from 3 million tonnes at present, he added.

Prices

Mr Bishnoi said despite the steep hike in raw material prices RINL was not increasing rates in accordance with the instructions of the Union Government to rein in inflation.

“We have reduced prices by Rs 2,000 per tonne and our prices are ruling at Rs 42,000 per tonne and we have no plans to increase them,” he said. When it was pointed out that steel prices in the local market were well above Rs 50,000 per tonne, he said RINL had little control over the margins of retailers but was taking all steps to improve the distribution system.

He said RINL had introduced the district-level dealership scheme, as also e-auctions to improve distribution. The prices were displayed on the Web site and the procedures were being made simpler and transparent.

“The share of the South and Andhra Pradesh in the plant’s sales increased from 52.4 per cent during 2006-07 to 54.5 per cent in 2007-08 and specifically AP’s share has gone up to 34.3 per cent. There is a huge demand-supply gap in the market, but we are doing our best to meet the local needs,” he explained.

He said there was a proposal to merge RINL and NMDC, as the former did not have captive iron ore mines, and “in my view it will be in the best interests of both”.

On the Chhattisgarh steel plant being set up by NMDC, he said both RINL and SAIL had withdrawn from the project as equity partners, but RINL would lend technical and marketing assistance to NMDC.

Along with SAIL and others, he said, RINL was also trying to acquire coal mines abroad through a special purpose vehicle.

RINL may invest Rs 500 crore as its share of equity in the joint SPV.

The company spent Rs 19 crore during 2007-08 on various community welfare measures and this would be increased to Rs 35 crore during the current financial year, he said.

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