Bhilai, Mar 22: The multi-million ambitious Modernization and Expansion Project of Maharatna PSU – Steel Authorities of India Limited (SAIL) is likely to come under CAG scanner as it failed in achieving the target even after making exuberant expenses.
The modex project involving capital investment of Rs 78005 crores was scheduled to be completed in the year 2012 but the company is struggling yet for its completion. Rajya Sabha member Sanjay Singh (Member, Standing Committee on Coal, Steel and Mines) has approached Comptroller and Auditor General (CAG) with complaint regarding irregularities in Modex projects of SAIL. In his detailed letter highlighting various facts and figures, Singh suspects large scale irregularities, negligence and corruption in the project.
Talking to Central Chronicle, MP Sanjay Singh asserted that the scale of irregularities in SAIL can be compared with the recently unearthed case of Punjab National bank. He added that SAIL’s Independent Director Dr Samar Singh has also confirmed irregularities and corruption in SAIL’s modex project. He further said that the entire matter should be minutely audited by CAG for identifying the weaknesses in the present system. Responsibilities should be fixed for the mistakes and deviations as well as strict action should be taken against the responsible.
Singh further informed that SAIL was conferred with Maharatna Status in May 2010, thereby giving it ample autonomy to make its own business expansion decisions and investments so as to earn more profit and at the same time achieve global competence. SAIL launched its massive Expansion and Modernisation program in 2007-08 under the name Corporate Plan-2012 (after being cleared by SAIL Board on 21″ May 2007), according to which SAIL’s Hot Metal capacity should have increased to 26MT by 2012 end from the existing capacity of 15.20MT in 2007-08.
But the company performed miserably in the last eleven years and even after spending thousands of crores, petty increase in production capacity was registered. By the end of 2016, Rs 64529 crore was spent out of the total Capital Expenditure Plan of Rs 78005 Crores for Modex. SAIL’s hot metal production during 2007-08 was 15.20 MT and after spending 64529 Crores on Modex till the end of 2016, the Hot Metal production in 2016-17 was registered at 15.73 Million Tonnes, a miserable increase of 0.53 MT.
Singh argued that Rs 65,000 crore was sufficient enough to establish a Greenfield project of Integrated Steel Plant having 15 MT Hot Metal capacity. This argument can be confirmed with the fact that 6 MT Integrated Steel Plant is being established under SAIL- NMDC joint venture at Bastar with investment of Rs 25000 crore.
Singh further stated that SAIL earned Maximum profit of Rs 11,469 Crores in 2007-08 with 15.20MT Hot metal production and without any “Modernization and Expansion” and that too under Navratna Status, when Manpower was 1,31,000. But the Profit Before Tax (PBT) kept falling continuously since SAIL became a Maharatna in 2009-10. In the meanwhile, SAIL made new business initiatives like opening 11 SPUs, 4 Subsidiaries, One associate and 22 JVs. Singh demanded that the CAG should look into the impact of these new ventures on the reducing profit of SAIL and eventual loss in 2015-16.
CAG should explore the real cause for such huge loss in 2015-16. Singh stated that Dumping at predatory prices along with increased Depreciation and Interest cost are being cited as the reason for loss, but Steel price decline was around 40% of the price that prevailed in 2007-08 and total increase in (Depreciation + Interest) in 2015-16 with respect to 2007-08 was 2661 Crores. Hence, there should have been Profit of at least around Rs3000 Cr during 2015-16 compared to 2007-08 but the company is showing loss.
Singh questioned that keeping in view the poor performance of SAIL after getting Maharatna Status and making Capital investment of 64529 Cr (till 31.12.16), how judicious, cost effective and profitable is to open 11 SPUs in Non-steel producing states like Assam, J&K, Bihar, UP, HP, MP, Kerala; (b) to run 4 subsidiaries, One Associate and 22 joint ventures.
He further questioned that how judicious is to bring the 6 MT green field subsidiary “Chhattisgarh Mega Steel Limited” along with NMDC at Dilmili in Bastar district, at an estimated cost of Rs 25000 crore, in a situation when NMDC is already reeling under pressure to run its own 3.0 MT Steel plant in the same Bastar district at Nagarnar, for the last 8 years.