BUSINESS

Bokaro back into profitable mode

BANGALORE DEC. 25. Of SAIL's four integrated steel plants, the one at Bokaro suffered the most due to the steep drop in prices of flat products in 2001-02 since its output consists only of flat products. Bokaro's problem was further confounded by the fact that it had to restrain output due to low demand. The plant ended last fiscal with a net loss of Rs. 459 crores against a production of 3.2 million tonnes (mt) of salable steel.

This year has seen a sharp rise of nearly 40 to 50 per cent in the prices of flat products, thereby turning the tide for Bokaro. According to its Managing Director, Mr. Arvind Pandey, in 2002-03, Bokaro should show a net profit of around Rs. 250 crores, based on a production of 3.3 million tonnes of salable steel, comprising 8.5 lakh tonnes of cold rolled coils and 2.45 mt of hot rolled coils. Increased demand has enabled the plant to halve the finished inventories of Rs. 1,200 crores running last year.

Bokaro was initially set up with the technology of the Sixties and this put it at a competitive disadvantage compared to the new mills in the private sector that came in the Nineties. Therefore, a modernisation programme was taken up in the mid-1990s of which the first phase, costing Rs. 2,468 crores, was completed recently. This involved upgradation of the charging and tapping systems in the five blast furnaces, introduction of continuous casting (two double strand slab casters) in steel melting shop II and modernisation of the hot strip mill. As a result of this, the salable steel capacity has been increased from 3.19 mt to 3.78 mt, the yield of salable steel from liquid steel has gone up from 78.2 per cent to 84 per cent, the specific heat consumption per tonne of crude steel has come down by 36 per cent and the cost of production of salable steel has been brought down from Rs. 9,536 to Rs. 9,171 per tonne.

But, more significant than all this is the higher quality and higher value products that can now be made. For example, it is now possible to purify the entire liquid steel produced by the basic oxygen furnaces in two secondary refining units before being fed to the continuous casters. The hot strip mill can now produce strip as low as 1.2 mm thickness, which enables some customers, such as those making electrical panels, to substitute lower cost hot rolled coils for the high priced cold rolled coils they are using at present.

The second phase of modernisation, yet to be taken up, will comprise replacement of ingot making by four single strand slab casters in steel melting shop I, further automation in the hot strip mill and upgradation of the cold rolling mills which will enable them to produce 1.6 mt (now the output is only 1 mt). The latter will involve coupling a pickling line with the tandem mill in CRM-1 and updating the computer systems in CRM-2.

What is the Bokaro steel plant capable of? Mr. Pandey believes that with certain strategic investment, such as augmentation of oxygen supplies, introduction of coal dust injection in all the blast furnaces and the Phase-2 modernisation, Bokaro should be able to produce seven million tonnes of crude steel per annum by 2010. The investment needed may not be more than about Rs. 200 crores per annum for the next five years.

The only shadow on the horizon is the "people factor.'' The politically and socially fragmented environment of Bihar has had its repercussions on the plant. If .Vajpayee thinks it is a headache running the fractious NDA Government, he should try managing Bokaro, which has, on last count, as many as 135 unions. The creation of Jharkhand State, to which Bokaro has gone, provides no succour, since the fragmentation and backwardness remain the same. To add to the management's woes, pressure is being drummed up to hire the dependants of all those employees who died in the past when still in service and the descendants of the families who were displaced when land for the plant was acquired back in the early 1960s. Over to you, Marandi.