Cabinet approves SAIL, Iisco merger

The Cabinet today put its seal on the much-awaited merger of Steel Authority of India and Indian Iron and Steel Company.

Briefing reporters after a Cabinet meeting, Minister for Information and Broadcasting S Jaipal Reddy said, "The proposal for the complete merger of IISCO and SAIL" had been approved "for a larger purpose of synergies".

An official release said the process of merger could take place "after taking the approval of the Board for Industrial and Financial Reconstruction". But BIFR officials refused to comment on this, saying that the matter was "sub-judice".

SAIL Chairman VS Jain, in a press release, said, "With SAIL's financial and managerial capabilities and availability of potentials with IISCO-like minesollieries, large infrastructure facilities and good work culture, there would be greater synergy for capacity expansion and technological upgrading of the plant."

BIFR had declared IISCO sick in June 1994. Though IISCO has been making profits since 2003-04, the company still had accumulated losses of Rs 954.57 crore on March 31, 2004. With its merger with SAIL, which has cash reserves of Rs. 5,670 crore, the big question is who actually takes the onus to clean the slate.

But SAIL executives seemed to be less worried about it. They maintained that with the go-ahead by the Cabinet, a "milestone" had been crossed.

After the merger, the total hot metal capacity of the entity stands at 13.85 million tonnes. With SAIL's work force being 1,26,827 and IISCO's 16,218, the total work force adds up to a gargantuan 2,89,037.

"This over-employed entity will have it's problems and that needs to be sorted out," said a industry veteran.

There were mixed reactions to this development. Indian Steel Alliance President Moosa Raza welcomed the move while SC. Mathur, executive director of Cold Rolled Steel Manufacturers' Association (CORSMA) seemed not too much affected by the development. Other steel industry players, too, appeared not much interested in the development.

"Since the mine lease is named under IISCO, after the merger, the ownership rights of the mines will have to be sorted out," said J Mehra, director of Essar Steel. IISCO has 3 iron ore mines and 3 collieries.

Though IISCO does have leased iron ore mines, SAIL has never really had a shortage of iron ore. SAIL has always scouted abroad for coking coal and fulfilling this shortage will continue to be a big headache for the company.

"Post-merger, and with prices of raw-material sky-rocketing, I do not believe SAIL is any well placed," maintained another industry player.