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SAIL may go into red this fiscal
Sunil Mukhopadhyay
CALCUTTA, Dec 28: The state-run Steel Authority of India Ltd (SAIL), one of the navratna firms, is heading for a loss after being out of losses for over a decade, senior company officials said. Although SAIL reported a profit of Rs 48.53 crore in the first half of the current fiscal, the gloomy market situation is leading the steel major into losses and financial crisis, sources said.With a lull in infrastructure and construction industries, new capacities being commissioned and dumping by east European countries, the steel market is extremely sluggish. Contrary to the normal trend in earlier years, but similar to the situation last year, sales in the second half of the financial year have been alarmingly low. Company sources said its stock stands at 1.4 million tonnes. The production of hot-rolled (HR) coils is more than what the country can absorb, and HR coils, which form a big chunk of SAIL's stocks, are just deadstock that may have to be disposed of with high rebates. Earlier, the company's
marketing wing was looking forward to high sales in the last quarter of the financial year, but with elections round the corner, the steel market is likely to face a near crash, rather than pick up, observers say. Sources said new commercial director KAP Singh has been pleading for a major cut in the production of flat products. Net sales realisation for most of the company's products is less than the cost of production (including interest and depreciation charges), leading to a situation where SAIL's declining profits would dip below the breakeven point. The worry is not so much about the losses during the current fiscal. The fear in SAIL is that the critical market situation is likely to continue in the years ahead, sources said.Unfortunately, a SAIL insider said, despite all tall claims, the top management is unable to see any light at the end of the tunnel and has so far gone in only for soft options. In spite of a very high manpower and atrociously low labour productivity, it is patiently waiting for
the employees to retire and reduce the numbers. Bhilai Steel Plant, for example, with the highest productivity in SAIL, boasts of 130 tonnes of crude steel per man per year, against more than 400 tonnes in the advanced countries. Cost ineffective mining practices, wasteful raw material handling and inefficient plant operations led to very high raw material costs, absorbing a major chunk of the production cost. Although modernisation has helped reduce energy costs, they are still high by international standards. A senior official said instead of focusing on the prime cost saving areas, the management's attention is on the periphery with minor savings. If it cannot come out with a plan for a major cost reduction and organisational restructuring within a short period, things may go out of hand permanently and the damage can be enormous not only for SAIL, but the entire economy, hesaid.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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