Garden Reach To Provide Issal Cheap Power

Calcutta-based Garden Reach Shipbuilders & Engineers, a public sector unit, plans to set up a captive power plant to meet the power requirements of Indian Seamless Steels & Alloys (Issal). The total cost of the power project is likely to be Rs 70 crore.

Issal, which has been ailing for quiet some time, is expected to save Rs 9 crore per annum from the deal with Garden Reach Shipbuilders & Engineers as the company would get power at Rs 3 per unit as against Rs 3.87 per unit presently being supplied by the Maharashtra State Electricity Board.

A memorandum of understanding was recently signed between the two companies to set up the power project at Issal's steel unit at Jejuri, Maharashtra.

 

The power plant will have a total capacity to produce 43mw and will be built in two phases. The first phase will consist of 18mw and the second phase will involve 25mw.

"We have agreed to provide Garden Reach Shipbuilders & Engineers land and water at our existing manufacturing facility at Jejuri to set up the power project," D V Taneja, managing director, Issal, said. Issal consumes around one crore unit of power per month to fire its electric arc furnace which manufactures alloy steels.

The company has enhanced its production capacity from 1.5 lakh tonnes to 1.90 lakh tonnes mid-last year. Issal has set a production target of 1.30 lakh tonnes for the current year, as against 1.02 lakh tonnes produced in 1997-98. During the first quarter ended June 1998, Issal increased its sales by 20 per cent in volume and 17 per cent in sales earnings, as compared with the previous year.

The company has substantially reduced its debt by converting around Rs 100 crore of the Rs 300 crore loans into preferential equity capital. As a result, interest outgo in the current fiscal will be much less when compared with the previous year.

The conversion of debt into equity is part of the restructuring exercise to turnaround the company from the red. The financial institutions and banks have also agreed to waive the penal interest liable due to non-payment of dues on time.

Meanwhile with the domestic market for alloy steel continuing to remain depressed, Issal has decided to make a foray into the export market. The company has bagged an export order from a British firm for medium grade alloy steel.

According to Taneja, the trial export order for 500 tonnes of alloy steel was executed recently and the company is expecting repeat orders for larger volumes.

"We cannot take the domestic unstable market ripples everyday and therefore the only way out is to enter the export market," he said. Taneja pointed out that the company was now on the look out for more orders in the overseas markets. Issal plans to export 5000 tonnes of alloy steel in 1998-99, as against a meager 40 tonnes exported the previous year. Issal last month was awarded the ISO 9002-1994/EN ISO 9002-1994 certification for manufacture and supply of cast and rolled products of carbon, alloy and special steels by the Indian Register Quality Systems.