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Burn Standard moots Salem mines hive-off -- Joint venture route favoured

Indrani Dutta

CALCUTTA, Dec. 24

THE management of Burn Standard Co Ltd, a public sector undertaking, is planning to hive off its magnesite mining operations at Salem in Tamil Nadu into a joint venture with the primary aim of cutting down costs.

Informed sources said that this matter had been discussed internally as also with bankers. The Salem unit has three captive mines at different locations around Salem, with a total area of 762 hectares.

These mines are the main source of raw materials for the production of fired bricks with high silica content, dead burnt bricks and light calcined magnesite, which are used by Burn Standard for its own production. A part is also sold outside.

The total value of the production at these mines was Rs 8.95 crores in 1999-2000. A 689-strong workforce is engaged at these mines.

Confirming the move, Mr I.C. Sinha, Burn Standard MD, told Business Line that although the output of the captive mines under the Salem unit was good, the operations were not cost-effective. However, he pointed out that no decision had been taken yet as t he matter had to be approved by the company's board, the Department of Heavy Industries as well as BIFR (Burn Standard is listed with the Board for Industrial and Financial Reconstruction). "We will present it as a mid-course correction needed for the co mpany's revival," he said.

Sources said that the issue had been engaging the attention of the management for quite sometime as Burn Standard's products were becoming uncompetitive on account of uneconomic mine operations.

Detailed discussions have been held by the company top brass on the issue. It has been decided that the selected partner would have to supply a minimum quantity of specified mined material at a pre-determined price to Burn Standard. The partner would be free to sell the balance output.

The building, plant and installation forming the block capital would be reckoned as Burn Standard's share capital in the joint venture. Working capital would be the partner's responsibility. Also, the partner would be required to employ the existing work ers for at least five years.