New Delhi: After 27 years of looking the other way, the steel ministry plans to dismantle the government-owned Bird Group of Companies, which consists of seven mining subsidiaries that have mostly posted losses and, in one case, been investigated for a theft over iron ore.
The decision comes amid the growing worldwide demand for steel, the commodity vital for the construction of power plants, automobiles, buildings and other infrastructure—and a steel ministry with renewed interest in the mineral resources and mining leases it holds.
The Bird Group has iron ore, manganese, dolomite and limestone mining interests mostly in Orissa, a state that is trying to turn itself into India’s steel hub.
South Korean steel giant Posco, for example, has committed India’s single-largest foreign investment with a proposed $12 billion (Rs51,600 crore) steel plant in Orissa, but its efforts have been stymied partly by its inability to secure a mine lease.
The steel ministry, which runs 13 companies and controls areas from steel manufacturing to fire-clay brick making to tube-well drilling, plans to shut down three of the seven subsidiaries of Bird Group. Two coal mining outfits, Burrakur Coal Co. and Borrea Coal Co., which saw revenues slump after the nationalization of coal mines in the 1980s, have begun the process of liquidation.
Most of the remaining companies, with their large payroll expenses, have been repeatedly bailed out by the government. The Kolkata-based Bird Group employs roughly 2,500 workers across its units.
The chairman of the Bird Group of Companies, Champak Bannerjee, declined to comment.
According to a former Bird executive who spoke on condition of anonymity, a lack of autonomy, low mining mechanization and poor marketing drove the companies to suffer losses.
“Nobody at the Centre wants to take any decision,” said the former employee. “Nor do they understand mining, which needs to be professionalized. Now that the sector is witnessing a boom, we may already be too late to rake in the profits.”
That delay is evident in other areas as well. Revision of salaries took place only last year after nearly three decades, employees said. Before January 2006, the group’s managing director earned just Rs12,000 a month.
The restructuring plans for the group, prepared by former steel secretary Jayant Bagchi, comes even as a proposed new mines and mineral policy is pushing for big investment in specialized mining and exploration in the sector.
The restructuring report, to be ready by 8 April, plans to club together three units—the iron ore and manganese mining company Orissa Minerals Development Co. Ltd, the limestone and dolomite mines of the Bisra Stone Lime Co. Ltd and the cement-grade limestone mines of the Karanpura Development Co. Ltd.
The two remaining companies, Scott & Saxby Ltd, which is engaged in tube-well digging operations in West Bengal and Tripura, and Eastern Investments Ltd, which is basically an investment company with cross-holdings in the other group subsidiaries, will be closed down. “Of the seven companies, five are in a dismal shape,” said Bagchi.
It’s a good time to go for a makeover. India’s crude steel output touched 44 million tonnes, up from 40.9 million tonnes last year, but riding growth and development nationwide, consumption is widely expected to multiply.
But Orissa, with its focus on securing iron ore for private steel manufacturers and key investors, might block Bird’s plans to enhance iron ore production. Under Orissa’s policy framed in early 2000, the government favours giving mines to big steel manufacturers for a higher impact on the economy.
Last year, the state refused to renew Orissa Minerals’ mining-lease permission at Kolharoida and Balki for violation of mineral concession rules, allegedly for entering into agreements with private players without its permission.
In 1992, Orissa Minerals signed an agreement with Usha Rectifier Corp., a privately held company, to form East India Minerals Ltd. (Orissa Minerals obtained a stay on the state’s decision from the Orissa high court in January.)
The state also alleges that Orissa Minerals does not have the required forest and environmental clearance permits, which allow forests to be used by industry, for two locations, in Balkundi village and Thakurani Hills.
However, matters between the state and Orissa Minerals really came to a head when two trucks of iron ore were seized near a mine leased to the company in January.
“The police claimed that our officials were involved. But in a mine that has no guards, anyone could have lifted them,” said a company official. He admitted there have been rampant cases of stealing and that at least two people had been murdered in a scuffle over iron ore in the past two years.
The steel ministry has initiated a probe and directed the deployment of the Central Industrial Security Force for the first time in the mining area last month.