SAIL may defer finalising expansion plan

SAIL may miss the 2010-deadline to complete its ambitious expansion and modernisation programme to enhance production capacity from 15 million tonne to over 26 million tonne with an investment of Rs 54,000 crore. This is the second major steel company to get affected from the global economic slowdown after Tata Steel. Officials in SAIL have confirmed that the board of directors has discussed the issue and would soon firm up the stand. The company will have to inform the steel ministry, which regulates the company, before finalising changes in its expansion plan. SAIL had to prepone the deadline for its expansion programme from 2012 to 2010 under pressure from the steel ministry. The decision was taken earlier this year when the global demand of steel products were on its peak. A senior official in SAIL, who did not wish to be identified, told that expansion projects could not be pursued as the domestic demand for steel has shrunk in recent months. “The global economic slowdown is here to stay. Expansion in this situation is risky. The 2010-deadline will be staggered by 3-4 years.” SAIL’s move to defer expansion comes close on the heels of Tata group chairman Ratan Tata’s reported communication to chief executives of all his group companies asking them to defer non-strategic acquisitions, slow expansion plans and cut costs. For steel, it would mean pressing the pause button on projects worth Rs 80,000-crore in the domestic market. Apart from Tatas, companies like Essar, Jindals and Ispat have already decided to cut output by up to 20% to narrow demand-supply mismatch. SAIL’s decision comes at a time when domestic market is facing a downturn.