Wheel turns a full circle for IISCO
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Merger with Steel Authority of India will put the ailing company on the growth trajectory
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Although IISCO has been a SAIL subsidiary, post-merger it would become the public sector behemoth's fifth integrated steel unit.
NEW LEASE OF LIFE: A panoramic view of Indian Iron and Steel Company's Burnpur plant in West Bengal. The company has got a fresh lease of life after its merger with Steel Authority of India Ltd.
THE LOGISTICS advantage of Indian Iron and Steel Company (IISCO), along with availability of over 600 acres of surplus land and the anticipated flow of resources post-merger, places this nearly 100-year-old company at the threshold of a growth trajectory. But the merger holds promise for the parent, Steel Authority of India Ltd. (SAIL) too.
Industry experts say: "Once upgradation is completed along with the addition of some finishing mills and after IISCO stabilises at two million tonnes capacity (against three lakh tonnes now), taking it to a ten-million tonne production-level should not be a problem."
The merger, once in place, would benefit SAIL too. The reasons are simple. Although IISCO has been a SAIL subsidiary, post-merger it would become the public sector behemoth's fifth integrated steel unit. This would simplify interplant transfers, allocation of jobs and raw materials, especially coal and iron ore from Manoharpur rated among Asia's best iron ore mines.
This was also one of the first issues highlighted by SAIL Chairman, V. S. Jain, soon after receiving the Government's nod. He mentioned the synergies that could be tapped between IISCO and Durgapur Steel Plant (DSP) and through the use of the mines for SAIL as a whole.
IISCO and DSP are located in Asansol area, being about 50 km apart. Both are long products units manufacturing structurals, bars and rods, used in the construction sector and in projects. A day after the merger, the Managing Director of DSP, S. K. Bhattacharyya, spoke in the same tenor saying that the plants had complementarities and the way forward would be to synchronise production, so that a complete product package could be offered to projects such as dams or for transmission towers.
However, while this move would benefit SAIL as a whole, the fact remains that IISCO hardly faced any problem selling its products which were fast-moving items according to industry watchers. Riding on the industry boom and deriving the benefits of some investments in upgradation, IISCO reported a Rs. 46.60 crore profit in 2004-05, on a turnover of Rs. 1,487 crore (unaudited). Its accumulated losses still stand at Rs. 924 crore. Historically, high cost of operations, ageing equipment, low productivity and a large workforce (16,218 as on April 1, 2005) proved to be the bane of this once blue chip company in which even late Ramnath Goenka acquired a chunk of shares in the late Sixties/early Seventies.
Ageing equipment
However, that sounded increasingly like a lore over the last decade, as the plant and the fate of its workers hung on a precipice. The management of the company, founded by visionary entrepreneur Sir Biren Mookerjee in 1918, passed into government hands in July 1972 as a loss-making unit.
It became a wholly-owned subsidiary of SAIL in March 1979 and the onus of upgradation rested squarely with the parent. Although SAIL was supporting the unit to sustain operations, in the absence of ministry support and in the wake of different postures adopted by various governments at the Centre, SAIL could do little as a state-controlled PSU.
An attempt at implementing a Rs. 6,000 crore modernisation plan through the turnkey approach fell through in the mid-Eighties, during the Rajiv Gandhi regime, and the fortunes of the ailing company fluctuated with that of the reigning government.
It became a Board for Industrial and Financial Reconstruction (BIFR) company in 1994. In 1999, the company got a reprieve, when as part of a package sanctioned for SAIL, IISCO got Rs. 1,947 crore waiver on advances received from SAIL for sustaining operations. Consequently, IISCO's accumulated losses dropped, cleaning up its balance sheet substantially.
This paved the way for divestment. However, a global tender for expression of interest (EoI) received only a lukewarm response even as an earlier effort to do it through participation of a secondary steel producer, sparked widespread opposition from the Left and the trade unions. In June 2002, the Government approved a revival package submitted by SAIL, which included a Rs. 540 crore component for implementing a voluntary retirement scheme (VRS).
In 2003, the operation of the Kulti foundry was closed with employees retiring through VRS. In between, some piecemeal modernisation jobs were taken up.
Now, SAIL has announced its plans to dovetail a Rs. 4,000 crore IISCO upgrade plan into its 2012 corporate plan announced earlier for its other units, taking the first major step towards fulfilling its decades-old promise made during the takeover.
The wheel for IISCO has now turned a full circle.
Indrani Dutta
in Kolkata
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