SAIL cancels Posco order of Rs 2,000-cr

State-owned Steel Authority of India Ltd (SAIL) has terminated a Rs 2,000-crore order given to a Posco unit for constructing a blast furnace at Bhilai Steel Plant, as the South Korean firm failed to sign the contract despite several reminders.

Posco E&C (Engineering & Construction) last year won a bid to construct a blast furnace on an EPC (Engineering, Procurement and Construction) turnkey basis for SAIL’s Bhilai Steel Plant which is working to double its production capacity.

The subsidiary of steel behemoth Posco delayed the signing of the pact despite repeated reminders and thus SAIL’s board on June 19 decided to terminate the offer. Posco E&C officials could not be contacted immediately. SAIL will now go for retendering for the supply of the blast furnace to the Bhilai unit.

Steel Secretary P K Rastogi said: “SAIL, in a recent board meeting, decided to cancel the offer made to Posco E&C for the construction of a blast furnace and supply of necessary equipment to the Bhilai Steel Plant (BSP). The company will float a new tender now.”

Last year in February, the South Korean firm said it had won a $400 million (about Rs 2,000 crore) order to construct a blast furnace for BSP. The contract was a costly proposition for SAIL in the light of heavy correction in the equipment rates on account of the economic crisis, the secretary said. The steel maker is likely to get cheaper deal in the new tender. This may help it to reduce cost of expansion, which is pegged at Rs 55,000 crore.

“SAIL will definitely see cost of expansion going down. By more such steps the cost would further go down,” Rastogi said.

Steel Minister Virbhadra Singh had earlier said that recession should be taken as an opportunity by procuring services of global leaders in engineering and construction activities at a cheaper rate.

Bhilai Steel plant is undertaking a Rs 12,000-crore expansion programme to double its production capacity to around 7 million tonnes per annum.