SAIL’s monopoly over railway’s steel demand to end, SKS Ispat MD Optimistic about the Private Foray
The monopoly of Steel Authority of India Limited (SAIL) over Indian Railways’ steel demand is likely to be laid to rest by the Center. According to SKS Ispat MD, Anil Gupta, the doors that have been opened to the private market, will be beneficial for modernization plans and railways expansions. The government is seeking a host of private steel dealers that can meet their $700 million-worth steel purchases. This is good news for steel giants like Tata Steel and JSW Group, whose chairman is looking to acquire failing steel firms to further their expansion.
Indian Railways is in the process of a $130-billion makeover that has been planned over five years. The deteriorating railway tracks and over-stuffed coaches point out the dire need of changes in the world’s fourth-largest railways network. Fiscal year 2017 will show SAIL a deficiency of 250,000 tonnes of rail tracks in its 850,000-tonne target. Commencing of operations at the new SAIL rolling mill at Bhilai can boost SAIL’s capacity by 100,000 tonnes. However, the sudden 45% hike over the last two years is unmanageable.
The Railways Board chairman, AK Mittal wrote a letter to steel secretary Aruna Sharma to divert the focus on rail supply in the Railways Safety Fund. In the letter, he said, “Unless SAIL steps up supply, the whole programme will be at risk.” Another government official explained, “SAIL’s performance has been very poor and given that we have a MoU (Memorandum of Understanding), any failure will not be appreciated.” The official wished not to be named as this matter is a sensitive one.
SAIL is currently making losses and the steel ministry is trying to cover for it. Losing even a small chunk of business to private suppliers will prove to be a big blow to SAIL. An expert panel will be set up by the government as the company is far less performing despite its $10 billion expenditure over the last eight years. The 4% hike in SAIL’s domestic sales can be commended but it needs a lot of work, perhaps a miracle.