Eyeing turnaround, JSPL to expand Odisha steel plant capacity to 20 mtpa

Bringing cheers to the debt-straddled Jindal Steel and Power (JSPL) group, its flagship 6 million tonne steel project at Angul in Odisha, which accounted for the most of the debt pile of the company, has started making operational profit from this month after four and half years of going into operation.

Encouraged by this turnaround, the company now plans to expand the capacity of the project to 20 million tonne of finished steel by 2030 at an additional investment of Rs 450 billion.

“We have learnt our lessons from the difficulties of operating with a high debt stock and won't go for any loan for the expansion. We would finance it by roping in strategic partners, raising equity and from internal accruals over a period of time," Navin Jindal, chairman, JSPL told Business Standard.  

"As of now, we have started making operational profit at Angul, that is earnings minus expenditure excluding interest pay out obligation. In fact, the project has started contributing to debt servicing," he said.

Out of total Rs 420 billion loan liability of the group, the Angul steel complex where JSPL has invested Rs 350 billion, accounted for Rs 240 billion debt.

With the interest pay-out estimated at Rs 2 billion per month and the innovative coal gasification route chosen for steel making at Angul facing uncertainty following cancellation of coal blocks of the company, the unit was losing Rs 1 billion every month.

However, installation of a blast furnace with capacity to produce 4.5 million tonne of hot metal per annum last year had laid the path for turnaround in the performance of the project.

“We are ramping up production every week and now reached a level of 9,000 tonne of hot metal and steel production per day which is about 60 per cent of the intended capacity. We plan to produce 0.3 million tonne steel next month (November) and step up the monthly output to 0.45 million tonne by March, 2019”, he added.

JSPL’s Angul unit aims to make 3 million tonne steel this fiscal and achieve the target of 5.4 million tonne of finished steel in FY 20.

“We would start work on our plan to expand the project capacity to 20 million tonne in 2020 after achieving the existing unit’s full capacity of 6 million tonne”, Jindal said. At present, the company has 11 million tonne of steel capacity across facilities in Odisha, Chhattisgarh and Oman.

Continuous ramping up of output, improved operation efficiency and remunerative steel price have come together to bring a change in the fortunes of the project. However, sourcing of raw material in the absence of a captive mine and logistic issues like short supply of rakes by Railways to ferry iron ore from mines to the plant forcing the company to carry raw material and finished products by road still pose challenges, Jindal said.