The government is considering privatisation of two perennially loss-making units of public-sector steel major SAIL — Salem Steel Plant (SSP) in Tamil Nadu and Visvesvaraya Iron and Steel Plant (VISL) in Karnataka. The move is aimed at strengthening SAIL, which plunged into the red last fiscal, after a gap of 13 years.

“It’s a very preliminary discussion. We are not considering offloading the entire stakes in either of them (SSP and VISL). The sole aim is to make them profitable,” steel secretary Aruna Sundararajan told FE.

However, sources said on condition of anonymity that the government was looking at strategic disinvestment and was even willing to transfer management control of these two sick units to private players.

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SSP is a special steel unit which pioneered the supply of wider width stainless steel sheets and coils in the country. It has an annual capacity to produce 3.39 lakh tonne cold-rolled and hot-rolled stainless steel. VISL, which produces alloy and special steels, has 2.16 lakh tonnes of hot metal production capacity.

SSP accounted for around Rs 350 crore and VISL Rs 115 crore to the SAIL’s net loss of Rs 4,137 crore in the last fiscal. Revenue of these two units were to the tune of Rs 1,600 crore and Rs 232 crore, respectively, in 2015-16. The two had been incurring losses even when SAIL was registering profits in the earlier  years.

While SAIL posted a Rs 2,092-crore net profit in 2014-15, SSP reported Rs 249-crore loss and VISL, Rs 97 crore. In 2013-14, the loss of SSP and VISL stood at Rs 281 crore and Rs 123 crore, respectively. SAIL reported R2,616-crore net profit that year.

SAIL has been trying hard to reduce costs at all levels for some time now. On a drive to cut operational costs amid adverse market conditions, SAIL reduced bonus payments to its over 70,000 non-executive employees by almost half last fiscal. The PSU is also winding up many of its branch offices and pruning travel expenses of its senior executives.

The previous steel minister, Narendra Singh Tomar, had even directed the company to appoint an external consultant for a 360-degree review of its structure and to propose a time-bound and outcome-oriented turnaround strategy among others.

The disinvestment in these two sick units will help SAIL strengthen its balance sheet particularly at the troubled times as is the case now. However, the move might face union protest.

SAIL is nearing completion of its R61,870-crore modernisation and expansion programme that will take its saleable steel production capacity to 20.23 MT from 11.1 MT. The company has five integrated steel plants at Bokaro, Bhilai, Rourkela, Durgapur and Burnpur.