The project is subject to the union petroleum and gas ministry agreeing to Kalyani Steels' request to change in the use of gas from utilising it for sponge-iron project to the power
project.
The group was allotted 0.75 million cubic metres of gas a day for its proposed Kalyani Konkan Sponge project when it had approached the government in the late Eighties.
However, with the sponge-iron scene getting crowded, the group decided not to go for in it. Now that it has received the allotment, the company is keen on setting up a gas-based power plant.
The company says that ultimately, the gas would be used for its steel plants through wheeling of power. This is our strategic move to enter into the power sector as our group being a major forgings and special steel manufacturer, we consume a lot of power, Baba Kalyani, chairman of Kalyani Steels, said.
With the sharp hike in power tariff by the state government, Kalyani said the company's margins were under pressure.
At present, its costs us Rs 3,800 in power cost to produce one tonne of steel, and this cost can drop by as much as Rs 1,000 a tonne if we go in for our own plant, he said.
The future power scene as he saw it was bleak as the large projects proposed by foreign companies are yet to take off. This could further escalate the power tariff, he said.
As the Kalyani group will not be able to fund the project totally on its own, Kalyani said the group was on the lookout for a foreign partner. We are already holding talks with foreign companies, but it is too early to name them, Kalyani said.
In 1995, the tariff for high-tension consumers was Rs 2.60 per unit, but now it has gone up to Rs 3.78. Kalyani Steel has declared a dividend of 30 per cent on a pro-rata basis on enhanced capital.
The company passed a resolution to invest Rs 30 crore in inter-corporate investments at the annual general meeting yesterday. This, and the investments made in the last financial year, came in for heavy criticism at the meeting. He, however, defended the investment, saying it was necessary for continued growth.
He countered the charge made by shareholders that they had lost substantially in Kalyani Steels' scrip owing to the erosion in its share value by citing the examples of other mini steel companies. Kalyani Steels' scrip has dropped 70 per cent between September 1995 and September 1996.
