The plant is in need of additional facilities like billetcaster, electro-magnetic stirrer, AOD furnace, besides balancing facilities in the bar mill and other downstream units. This entails a cost of around Rs 60 crore to Rs 70 crore, ASP sources said.

However, SAIL at present does not have resources for investment and is exploring the possibility of private sector participation.

ASP's main problem, the sources said, is its high cost of production resulting from high fixed costs. Labour cost was as high as 30 per cent of its expenditure.

The management's move to reduce manpower via the voluntary retirement scheme (VRS) had yielded some results, but the plant still has a surplus staff of 1,250, the sources said. ASP is looking forward to another round of VRS, they added.

With the backward integration ofthe Salem steel plant, ASP will not have any buyer for its stainless steel slabs and get delinked from the stainless steel flat products market, the sources said.

The facilities of ASP and SSP were complementary since stainless steel slabs produced at alloy steels plant were rolled at Salem and finished products were sold from there. But with freight cost of around Rs 2,000 per tonne for transporting material from Durgapur to Salem, the continuation of this system did not have any rationale.

The sources, however, said there was a market for stainless steel long products and ASP could concentrate on this area by utilising its own finishing facilities. The plant has to bank on its expertise to produce around 250 varieties of special steels.

The plant is also taking steps to reduce the input raw materials cost which was another major expenditure area.

ASP, the sources said, has scaled down its production of saleable steel to 1.45 lakh tonne to reduce its stocks by around 50,000 tonne. The plant waslooking forward to a major thrust to liquidate its stocks in the second half of the current financial year.

But they felt that in the long run, even with down-sizing of its operations ASP will have to produce and sell around 15,000 tonne per month to keep its operations viable.

The ASP issue also figured in a big way at SAIL's recent `brainstorming' session organised to chalk out a turnaround strategy for the company which suffered a loss of Rs 311 crore in the first four months of the current fiscal.