Sail Braces For Emerging Threats
The Steel Authority of India enters the 25th year of its formation facing one of the toughest challenges ever.
Emergence of new markets, new suppliers and new products has created an environment to which a 25-year-old giant with old plants must adapt quickly. It faces a mix of opportunities and risks: opportunities that must be encashed by taking business risks.
SAIL's modernisation programme with investments totalling Rs 12,000 crore is aimed at taking its total steel-making capacity to 12 million tonne by the turn of the century.
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However, SAIL today has to cope with pressure on its profits as a result of depreciation and interest costs as revenues and realisations cannot increase due to an economic slowdown.
SAIL recorded an 85 per cent dip in net profits in the first half of the current year to Rs 48. 53 crore from Rs 361.45 crore in the first half last year on account of higher depreciation and interest charges and a hike in input costs by Rs 580 crore between April-September '97.
The annualised impact of the input cost hikes will cost Rs 700 crore, while the interest and depreciation cost on account of capitalisation of modernised units for the full year will be at least Rs 1,200 crore.
Cost reduction measures are expected to yield a benefit of Rs 800 crore, while increasing its focus on direct despatch of materials to customers.
The steps include pricing flexibility to suit individual customers and offset customer disadvantages due to location and a thrust on exports.
The year 1997-98 has shown negative growth in the domestic demand for steel against a five per cent and 13 per cent growth in 1996-97 and 1995-96, respectively.
Add to this the burden of supporting non-viable and non-profitable units and technological backwardness in critical areas where competition is emerging.
SAIL plans a combination of measures to increase investments in light steels and auto body sheets.
It considers going in for 100 per cent continuous casting by installing more casting machines to achieve 100 per cent continuous casting in the integrated steel plants.
It is also planning secondary metallurgy facilities to meet increased demand for superior steel quality and emphasis in the area of hot metal desulphurisation. Depending on the silicon level in blast furnaces, desiliconisation technology is also planned.
Post modernisation of crude steel production at Durgapur and Rourkela is planned at 1.8 million tonne and 1.9 million tonne, respectively. Investments at Bokaro and Bhilai will add 1 million tonne to their current crude steel capacity.