When Electrosteel Steels Ltd decided to set up 2.51 million tonnes per annum (MTPA) integrated steel and ductile iron pipe project (including captive power plant of 120 MW) at Bokaro, Jharkhand in 2006, project had everything going in its favour – strategic location of the plant with proximity to market and nearness to the source of the raw materials, group’s established position in the DI pipe industry, captive mines (coal and iron-ore) of the group, renowned international and domestic strategic partners for the project, achievement of financial closure and positive outlook of the DI pipe and steel industry.
Come 2013, the project seems to have come full circle with company being able to commence just pig iron and DI Pipe division. Today, Electrosteel Steels (earlier known as Electrosteel Integrated Ltd) is saddled with multiple problems – downturn in industry cycle, rising input costs, protest by locals, cost escalation and delay in commissioning of the project.
Considering the cost savings and project implementation efficiency, Electrosteel Steels went for Chinese technology which turned out to be its biggest blunder. In 2007-08, Electrosteel Steels had entered into contracts for procuring the major plant and machinery as well as erecting and commissioning of the same with Stemcor (UK), SDM (China), China First Manufacturing Company Limited (CFMCL) and 23rd MCC for construction works at the plant site. However, in 2009, a change in government’s Visa issuing policy threw the company’s work schedule haywire. A change in guidelines issued by the government restricting Chinese manpower with work visa affected availability of Chinese manpower for the project which affected the pace of project implementation and its schedule.
In the mean time, project cost too was revised upwards which was partly due to revision in project scope from 2.20 MTPA to 2.51MTPA. Project cost was revised upwards from Rs.7,262 crore to Rs.9,562 crore, an increase of Rs. 2,300 crore. Though Electrosteel Steels has been able to bring in equity portion of the enhanced cost, it is the debt portion which it is finding it difficult to tie up. But the company is hopeful of tying up the entire debt portion in the near future.
With all these hurdles getting resolved though slowly, the company is now hopeful of completing the project before the end of this financial year. By then the company hopes to see revival in demand for its products too.