Inflation, input cost may add to Sail's capital expenditure

The inflationary trend and rise in input costs are likely to escalate capital expenditure of India's leading steel maker Sail in achieving the ambitious 26.18 million tonne of hot metal production target by 2011-12. 

"Due to increase in facilities required to achieve the enhanced production, rise in input costs and general inflationary trend, the capital expenditure is likely to be higher than what was estimated earlier," Steel Authority of India Ltd (Sail ) said in a filing to BSE and NSE.

In June 2006, the steel major had informed the bourses that it would invest about Rs 35,000 crore under its corporate plan to augment steel production to 26.22 million tonne (MT) from the present level of 14.6 million tonne.     

At present, however, the indicative cost to be incurred by Sail  under its corporate has risen to Rs 54,000 crore. 
Industry experts said the rise in input costs besides spiralling inflation, which is ruling at 12.40 per cent, may further inflate Sail 's capital expenditure in achieving the desired capacity augmentation.

Based on the latest review of its corporate plan, the steel major has revised its hot metal production target to 26.18 MT from the previous level of 22.55 MT.

Its target for crude steel production has also been revised to 24.59 MT from 21.59 MT and saleable steel to 23.13 MT from 20.25 MT earlier. 

The expansion of Sail 's IISCO and Salem steel plants are already underway at a cumulative cost of Rs 16,350 crore while that of Bhilai, Durgapur, Rourkela and Bokaro steel plants are at different stages of tendering.The steel major has already finalised Rs 20,000 crore worth orders for the proposed expansion projects.