Financial institution on lines of PFC needed steel sector: SAIL

India needs to invest around $200 billion to treble its steel-making capacity to 300 million tonnes per annum (mtpa), SAIL today said and asked the Steel Ministry to float an entity on the lines of PFC to fund such projects.

It also asked the Ministry to facilitate setting up of manufacturing units for equipment required in a steel plant and reduce dependence on imports of such items, which may cost $120 billion, for adding 200 mtpa capacity.

India at present has about 90 mtpa steel production capacity. A high-level committee, headed by Prime Minister Manmohan Singh, had recently drawn a roadmap for taking the capacity to 300 mtpa by 2025-26.

"The 200 MT increase in steel capacity on incremental basis would require huge capital investments, almost about 200 billion dollars at about $one billion dollar per million tonne capacity," SAIL Chairman C S Verma said.

This massive requirement would entail coming together of banks and financial institutions to pool in their resources and come up with a dedicated body to finance these projects on the similar lines of Power Finance Corporation (PFC), he said speaking at an event here.

"PFC is committed to the integrated development of power and its associated sectors. Therefore, a dedicated financial institution, on the lines of PFC in the power sector, should be floated by the Ministry of Steel," Verma said.

Stating that 60 per cent of the required fund would need to be spent only on sourcing equipment from abroad, he said: "Consequently, steel capacity enhancement of 200 mtpa would translate to outflow of about $120 billion only towards equipment manufacturing or supplies."

"To reduce these costs, it is imperative for the Indian steel industry to give thrust towards setting up of world class equipment manufacturing facilities in India and to promote indigenisation of supplies of mechanical or electrical equipment," he said.

"Facilitation of the Ministry of Steel for setting up steel equipment manufacturing units in India is the need of the hour," Verma said.

Rashtriya Ispat Nigam's Chairman and Managing Director A P Choudhary also spoke on the need of setting up equipment- making units in India. "The number of reputed manufacturers in steel industry is limited, resulting in over-dependence and avoidable delays," he said.

"The solution lies in providing desired impetus to setting up adequate manufacturing facilities in the country, he said.

Choudhary also pitched for allocating captive iron ore mines to the steel industry or creating an policy which would support low-price regime.

"Iron ore mines have to be allotted to the steel producers on captive basis. If captive mines cannot be allocated, an economic policy has to be created, which will support a low price regime for iron ore in the country," he said.

Unless iron ore is available to the industry at cost or at very reasonable prices, steel industry can not be expected to be profitable, Choudhary said.