ALSO READGovt seized with formula for NMDC iron ore pricing Govt considering disinvestment in NMDC's Nagarnar steel plant Cap on cash withdrawal a decision beyond judicial review: HC Ban on cash tran over Rs 3L good; cash holding limit could NMDC gains as CCEA to consider disinvestment of its steel plant
Cash-rich state-run miner NMDC, for the first time after nearly two decades, may have to borrow funds for its ongoing projects next financial year due to dwindling cash reserves, a top company official has said.
There was significant drop in profits for the past few quarters due to fall in global commodity prices coupled with heavy investment the company has spent on its 3-million tonne steel plant at Nagarnar in Chhattisgarh.
The miner also had to shell out over Rs 7,500 crore to the government under the recent share buyback, resulting in falling cash reserves. According to 2015-16 annual report, the miner had over Rs 18,000 crore in cash reserves.
The company also paid about Rs 4,300 crore as dividend last year and nearly Rs 1,580 crore as interim dividend this year and this year also it may pay a similar dividend, the official added. The government owns 80 per cent stake in NMDC.
"There is no problem in fiscal 2017. But next financial year, NMDC may have to borrow from outside. We will have to invest about Rs 3,000 crore on the steel plant under construction next year. There would also be significant investment on the proposed slurry pipeline. On the other hand, profit is not encouraging due to fall in ore prices globally," the official told PTI requesting not to be named.
The proposed Rs 10,000-crore slurry pipeline transportation system (in two phases) is intended to transport pellet feed concentrate from Bailadila to Vizag via Jagdalpur along the national/state highways with a provision of partial offtake at Nagarnar to feed to the Nagarnar steel plant.
Last financial year, NMDC net income halved to a tad over Rs 3,000 crore from over Rs 6,000 crore the previous year. It has made over Rs 2,000 crore profit during the current financial year so far.
NMDC has spent about Rs 10,800 crore so far on the steel plant. The original estimate was Rs 15,525 crore. There will be about 10 per cent cost overrun due to delays.
"Every year, we are planning to spend Rs 2,500-3,000 crore on the steel plant. We spent Rs 2,500 crore last year and we are planning to spend Rs 2,800-3,000 crore this year as well. We plan to pump in Rs 2,500 crore next fiscal year," an official said.