The Hindu Business Line : Rourkela Steel set to post profits after eight years

RIDING on the current boom in the steel market, Rourkela Steel Plant (RSP), belonging to Steel Authority of India Ltd (SAIL), is all set to register a cash profit for the just ended financial year, 2003-04.

RSP will be recording this feat after eight years. It last registered a cash profit during 1995-96, when the steel industry witnessed a similar high in the global and domestic market.

It was learnt from sources that in 2003-04 RSP recorded a whopping 640 per cent growth in its gross profit. It went up to Rs 500 crore from Rs 70 crore in 2002-03.

Despite registering such a phenomenal increase in the gross profit, the plant will have to end with a net loss of Rs 50 crore after making provisions for interest payouts and depreciation, which would be in the range of Rs 550 crore.

RSP's annual interest payout is approximately Rs 260-270 crore. It is likely to drop further because of the regular financial restructurings done by the SAIL management. So, RSP is expecting a cash profit of approximately Rs 250 crore.

The total turnover of the plant has increased marginally to around Rs 3,000 crore from Rs 2,800 crore in 2002-03. In the last quarter of 2003-04, the plant was able to register a net profit of around Rs 95-100 crore too, but it was not enough to wipe out the net loss of the whole year.

At the beginning of 2003-04, RSP worked out a two-pronged strategy to return to the profit zone. The first was to increase in volumes to reduce the per-unit cost of production. And, the second move was to increase production of value added to maximise revenue earnings.

It may be noted that despite the boom in the steel sector, RSP was supposedly the only SAIL plant to function below the 100 per cent capacity utilisation mark.

The plant management worked out several schemes for the employees to touch the 100 per cent mark. As a result all modernised units within the plant operated at 100 per cent capacity utilisation for months together.

Production of major items continued to grow at RSP. Production of sinter was at 2.62 million tonnes, hot metal was 1.72 million tonnes, continuous cast slabs was 1.57 million tonnes and total saleable steel was 1.57 million tonnes.

"Saleable steel dispatches grew by five per cent to 1.59 million tonnes over the last financial year. The total sale of RSP products grew by four per cent during 2003-04," sources said.

The plant management concentrated on producing more of high value items like mill plates, galvanized sheets, silicon steel, tin plates, electric resistance weld pipes and spiral pipes.

RSP succeeded in reducing its overall energy consumption by 1.8 per cent. The annual maintenance cost dropped by eight per cent and the turnover of the captive engineering shops increased by 19 per cent.