SAIL to enter Kerala through joint ventureMarch 20th, 2008 - 9:23 pm ICT by admin
Kozhikode, March 20 (IANS) The ailing Kerala government-owned Steel Complex Limited (SCL) will be managed by public sector behemoth Steel Authority of India Limited (SAIL) as a joint venture project. “A rolling mill with 60,000 tonne capacity at an investment of Rs.500 million will be set up at SCL by the joint venture,” Kerala Industries Minister Elamaram Kareem said here Thursday.
“The draft of the MoU (memorandum of understanding) has been approved by the state cabinet and the board of directors of SAIL,” he said. The joint venture will come into being next month.
This will be SAIL’s first venture in the state. At present, it only has a steel depot at Kochi. The SCL, set up in 1972, registered profits only for two years, during 1985-87.
Currently, the state government holds 93.2 percent stake in SCL while the rest is with private individuals.
In the joint venture, the Kerala government and SAIL will have equal holdings. However, the management control will rest with SAIL.
As part of the agreement with SAIL, the government will consider settling SCL’s liabilities, which is in the tune of Rs.1.03 billion. SCL expects a total investment of Rs.2 billion from SAIL in the venture.
“We are ceding the management control to SAIL as this will bring in new technology. SAIL can also start the venture with a clean balance sheet,” Kareem said.
“The government may also consider converting liabilities to equity,” said SCL managing director K. Sasikumar.
With the new venture coming into operation, SCL will recast its production strategy. “Currently, the work of SCL is confined mostly to the conversion of steel scraps into billets. This is affecting the returns,” he said.
A new furnace is expected to raise the production of the unit from 2,200 tonnes a month to 4,200 tonnes. Currently, the unit got only one furnace.
Kareem said that though SCL will initially produce iron bars for the construction sector, the government expects that the SAIL will undertake production of special steel at a later stage.
He said SAIL will find the steel plant handy as it will help it supply to a booming construction sector in the state. “But the fact is that we needed SAIL more than they needed us,” he added.
The new venture will retain all the 195 employees of the SCL.
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