SAIL's special steel plants are Salem Steel Plant (SSP) in Tamil Nadu, Alloy Steels Plant (ASP) at Durgapur in West Bengal and Visvesvaraya Iron & Steel Plant (VISP) at Bhadravathi in Karnataka.

SAIL is scouting for possible joint sector partners, who would be willing to invest in these plants to develop and make them viable. Some stainless steel manufacturers from Britain, Canada and Japan, with global marketing interest, have made preliminary enquiries about SSP. SAIL has appointed JM Morgan Stanley to advise it regarding possible moves for SSP. However, there are as yet no takers for ASP and VISP.Hence, SAIL has made a revival plan for ASP, but the plan is being criticised as half-baked one by insiders.

However, SAIL is yet to come out with any revival plan for VISP. McKinsey, appointed by SAIL to suggest turn around measures, has said that SAIL should concentrate on its area of core competence- on mild steel production and marketing, and get out of the non-core sectors. It has even suggested that in the event of SAIL not finding suitable partner for a particular unit, it should be closed down.

Analysts feel that once SAIL is financially restructured and the market, which is looking up, yields more realisation, the main plants of SAIL should be doing well. But the special steel sector would continue to be a financial burden for SAIL.

In special steel sector, SAIL faces competition from large number of small producers with low overheads. Therefore, turning around the special steel units and making them viable is a more difficult task. This needs both specialised expertise and funds forinvestment.

A sharp drop of around Rs 8,000 per tonne in stainless steel price in international markets, put both SSP and ASP, which were functioning in a complementary manner, into the red. Stainless steel slabs cast at ASP were being transported to SSP for rolling into finished products. After the price crash, SSP stopped sourcing its slabs from ASP and went for cheaper imports.

Though SSP could earn an operating profit of Rs 10 crore in last fiscal, it had to incur a loss of Rs 170 crore due to higher interest and depreciation for recent technology induction. ASP, on the other hand, incurred operational loss of over Rs 100 crore and was caught into a "the more you produce, more you loose" trap.

SAIL officials believe that SSP can do well with backward integration by installing steel-making facilities investing around Rs 300 crore. This will make SSP a full-fledged steel plant rather than being a re-roller. SAIL, burdened with heavy loan and huge losses, has no fund and is looking a partner who wouldbe investing in SSP.