Braving the economic downturn and sagging sentiments,state-run behemoth Rashtriya Ispat Nigam Limited (RINL) is embarking on a major expansion exercise to ramp up its capacity to 8.5 million tonne at an estimated expenditure of around Rs 10,000 crore by 2012-13. The move comes at a time when other steel makers have resorted to either production or cost cuts to offset the effect of the downturn and maintain operational viability.
A steel ministry officials said it was heartening in view of the governments assertion that expansions should continue as part of contra-cyclical measures to beat the downturn. Already they had plans to expand their capacity to 6.3 million tonne from the present three million. They are planning to rope in a consultant to advise them on this expansion project, the official said. He reasoned that by the time the expansions were through,the economy would rebound and demand spiral would enable marketability of the produce. RINL,popularly known as Vizag Steel,is already expanding capacity at a cost of more than Rs 8,000 crore. To expand to 8.5 million tonne,the company will invest about Rs 18,000 crore.
Together Steel Authority of India Limited (SAIL) and RINL had embarked on expansion exercises worth Rs 63,000 crore wherein SAIL planned to ramp up its capacity to 26 million tonne at Rs 54,000 crore and RINL to 6.3 million tonne. Officials said RINLs expansion plan was in better shape than that of SAIL though it could face some delay.
The steel PSUs had a good time till some time ago as their combined contribution to the central and state government exchequers went up by 237 per cent from Rs 5,829 crore in 2003-04 to Rs 19,649 crore in 2007-08. With the overall scenario in the steel sector looking bright,India became the fifth largest producer in the world in 2006 as against eighth in 2003.
The steel ministry is understood to have favoured a mechanism wherein monitoring of the expansion plans could be intensified. RINL is more efficient than its competitors and despite having no access to captive raw material resources,it utilises raw materials more efficiently than others. In fact,in spite of paying much more for raw material,it has better margins than SAIL, an official claimed.