SAIL finalising plans to nearly double capacity to 34-35 mt by 2030-31

In next 3-4 years, it will add about 3 mn tonnes by sweating existing assets and debottlenecking, at a likely capex of Rs 10,000-11,000 crore

Public sector steel major, Steel Authority of India Ltd (SAIL), is in the process of finalising growth plans that will take its capacity to 34-35 million tonnes by 2030-2031. At present, SAIL’s operating crude steel capacity is around 19.5 million tonnes.

The firm will add about three million tonnes by sweating existing assets and debottlenecking within the next 3-4 years. The capex, according to SAIL, could be Rs 10,000-11,000 crore depending on the time of order finalisation.

In the next leg of expansion, which is under finalisation, SAIL will be adding 12-13 million tonnes in phases. This would be a mix of brownfield and greenfield projects at its current locations, the company said in response to queries from Business Standard.

The first of the major expansions is likely to be at the IISCO Steel Plant in West Bengal, which has a current capacity of 2.5 million tonnes. A new facility of 4.5 million tonnes was expected to be commissioned by FY29.

SAIL is among the top three steel producers in the country. The proposed expansion comes at a time when all major player have lined up massive capacity building plans. Big-ticket plans adding around 130 million tonnes are in the pipeline, and  would go towards doubling the country’s capacity to about 300 million tonnes by FY31.

The last phase of expansion by SAIL, it may be mentioned, entailed raising capacity from 12.8 million tonnes to the current levels. However, it got delayed due to the global financial crisis in 2008.

For the current year, the capex is pegged at about Rs 5,500 crore, of which the firm has already spent Rs 3,500 crore. In the coming financial year, it is likely to be Rs 6,500-7,000 crore, the management said during the earnings call for Q3FY23 last month. The capex plans are being drawn up even as SAIL’s borrowings have increased.

As on December 31, SAIL’s borrowings stood at Rs 29,270 crore, up from Rs 13,386 crore at the end of March 2022.

Responding to queries during the earnings call on what is giving it confidence to go ahead with capex plans despite the borrowings, the SAIL management pointed to the past and said that as on June 2020, total borrowings was nearly Rs 52,000 crore, but in less than two years, it was brought down to Rs 13,386 crore.

The borrowings have now risen as coal prices were extremely high and steel prices were not commensurate. But SAIL does not see coal prices remaining very high with a lower NSR (net sales realisation), the management said during the call. The company hopes to end the financial year with borrowings of Rs 24,000-25,000 crore sans surprises.

Growth plans in the works

• Plans to add 3 million tonnes through debottlenecking
• Another 12-13 million tonnes by 2030-2031 to take total crude steel capacity to 34-35 million tonnes
• Current operating crude steel capacity at 19.5 million tonnes