Inflation, input costs may bloat SAIL's expenditure

The inflationary trend and a rise in input costs are likely to escalate the capital expenditure of SAIL, one of India’s leading steel-makers, in achieving the ambitious 26.18 million tonne of hot metal production target by 2011-12.

“Due to an 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 (SAIL) said in a filing to the Bombay Stock Exchange.

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

Currently, however, the indicative cost to be incurred by SAIL under its corporate plan 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 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 is 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 orders for the proposed expansion projects.