BackSteel ministry to appoint consultant to boost SAIL profit
The consultant will also find ways to improve the operations of the country's largest steel maker and to undertake expansion in time, without cost overruns
PremiumNew Delhi: Worried over declining profit in Steel Authority of India Ltd (SAIL), the steel ministry has decided to appoint a globally-renowned consultancy agency to carry out a “diagnostic study" for enhancing the Maharatna’s performance.
The ministry will float a tender inviting expressions of interest from international firms to also look at ways to improve the operations of the country’s largest steel maker and to undertake expansion in time and without cost overruns. The consultancy firm, to be chosen after ascertaining its expertise and assessing technical and financial bids, would also be asked to chart out marketing plans, work on SAIL’s existing structure and suggest ways to better utilize its existing land parcel, a senior ministry official said.
Admitting that steel sector had been facing hard times globally due to lower prices and higher input costs, the official, however, said SAIL should not use them as reasons to justify its falling profits as most of the state-run firm’s products are sold within India.
Also, it gets a good chunk of raw material from captive sources. SAIL had clocked ₹ 6,754 crore net profit in the 2009-10 fiscal, ₹ 4,905 crore in 2010-11, ₹ 3,543 crore in 2011-12, ₹ 2,170 crore in 2012-13 and ₹ 2,616 crore in the last fiscal.
A steel company’s profitability can get impacted due to factors such as costlier raw material, lower price of the commodity and its demand and poor operational efficiency. SAIL is in a better position compared to many other domestic steel makers because of its captive sourcing of iron ore. However, it depends on imports for 75% of annual coking coal needs. The fluctuation in coking coal price exposes the steel maker’s profits to volatility. The company’s profit in 2009-10 was its second best and chairman C.S. Verma attributed the rise to higher saleable steel production and sales, higher production of the value-added products, an improvement in techno-economic areas and optimum utilization of funds. He attributed the dip in profit in 2010-11 to escalations in input prices, particularly of imported coking coal. Another key factor, Verma said, which affected profitability was the impact of foreign exchange variation. The 38.7% fall in net profit in 2012-13 over the previous year was largely due to lower net sales resulting from a subdued market, SAIL had said. The 20.6% rise in net profit in 2013-14 over the previous year was mainly because of higher turnover and growth in export sales. Higher production of value-added steel also helped, Verma had said.
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