Sell-off or revival? Fate of Amethi steel unit unclear

Is Steel Authority of India Ltd (SAIL) gearing up to close down UPA-II’s pet project, the Jagdishpur unit formerly known as Malvika Steel?

While officials in the Steel Ministry remain guarded in their comments about the fate of the unit, which is located in Congress Vice-President Rahul Gandhi’s Amethi constituency, they confirmed that the ministry is losing patience with SAIL’s revival attempts.

Incidentally, the plan to close the SAIL unit comes on the heels of the Congress leader’s charge that the Centre had deliberately scrapped a mega food-park project planned in Amethi, also in Jagdishpur.

Speaking to BusinessLine , a senior Steel Ministry official said: “It is difficult to revive the Jagdishpur unit without availability of domestic gas. SAIL has been asked to look at both aspects — revival as well as a sell-off.”

The official, however, pointed out that it could be difficult to find buyers for such an asset, which is unable to source key raw materials. In fact, the ministry has indicated that it would be best if SAIL concentrated on modernisation and expansion of its more viable units.

SAIL had purchased the defunct Malvika Steel Ltd for ₹ 209 crore in the first year of the UPA-II regime in 2009. The pig iron plant was rechristened Jagdishpur SAIL Unit in 2010, and Rourkela Steel Plant was entrusted with its revival. The unit has about 740 acres of land.

The company, previously owned by the Usha Group of companies, is located in the Jagdishpur Industrial Area — a brainchild of Sanjay Gandhi. The region flourished during the Rajiv Gandhi era — 1984-89. However, by the time Sonia Gandhi became Amethi’s Lok Sabha representative in the late 1990s, the industrial estate’s companies had begun to decline. Rahul Gandhi's efforts to revive the industries in the region began in 2011-12.

No funding Since coming to power, the Narendra Modi Government has pulled the plug on budgetary support for the steel unit’s revival. The Outcome Budgets for 2011-12, 2012-13 and 2013-14 show that every year a certain amount was sanctioned for the revival work at Jagdishpur. However, this support stopped in 2014-15.

The company had spent ₹100 crore to open steel processing facilities, including a 10,000-tonne-per annum cold forming line and 130,000-tonne-per annum corrugation line.

In 2011, former Steel Minister Beni Prasad Verma announced plans to invest up to ₹10,000 crore on the unit. SAIL had also engaged with Japan’s Kobe Steel to do a feasibility study for a plant in Jagdishpur. The ‘maharatna’ also formed a new subsidiary, called SAIL Jagdishpur Power Plant Ltd, to start a 1,000 MW gas-based plant.

Industry analysts indicate that putting the plant’s revival on the backburner is a wise decision as not more than ₹300 crore has been sunk into the project.

“Not much that has been invested in the actual plant. Even if the investments are written off and revival remains on the backburner, it won’t hurt SAIL’s balance-sheet. But it will be very difficult to find a buyer,” said a Mumbai-based analyst.

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