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Should IISCO's search for partner continue?

Rabindra Nath Sinha

KOLKATA, July 20

MR Nirupam Sen, West Bengal's Industry Minister, while replying to a calling attention motion in the Assembly on July 18 said the State Government was yet to hear from the Centre about the Rs 510 crore proposal for limited modernisation of the facilities of The Indian Iron & Steel Co Ltd (IISCO).

The scheme has been prepared by MECON Ltd, which in recent weeks undertook a quick study at the behest of the IISCO management, which was asked by the board to identify options. A copy of the report was given by IISCO Bachao Committee to the West Bengal Government which, in turn, remitted it to the Steel Ministry on June 29.

He also told the Assembly that the IISCO management was considering various other revival proposals like leasing of iron ore mines and that a turnaround would be possible even if Rs 360 crore (that is, minus Rs 150 crore assumed for VRS) could be pumped into the ailing outfit, which is within BIFR's purview since June 22, 1994.

Several questions arise from his reply. Does he expect the Centre to revert to the State Government? Does the IISCO management have powers to take decisions on modernisation? Who will take the initiative to organise funds?

The Rs 510 crore proposal is the latest addition to the update schemes that have remained on paper for so many years. And, this has been formulated at a time when the third attempt to convert IISCO into a joint venture through the global tender/expressio n of interest (EoI) route is about to draw a blank.

The last EoI notice issued by Steel Authority of India Ltd, the 100 per cent owner of IISCO, on April 14, 2000 saw TPE of Russia, BHP of Australia and Mitsui of Japan as respondents. Subsequently, BHP and Mitsui joined hands. After due diligence, they we re supposed to submit financial bids by June 30.

While TPE sought time till July 20 the BHP-Mitsui combine evinced interest only in the captive iron ore mines. Which means they are not interested in the steel plant and foundry; that is, the Burnpur works and Kulti works.

TPE was a bidder in response to the previous SAIL notice in August 1996 for joint venture. The Russian firm was banking on accommodation from the rupee-rouble escrow account. It went on giving hopes to the Indian side, but never received the Russian Gove rnment's okay. The position is not any different this time round and yet SAIL or for that matter the Steel Ministry never mustered courage to decide that its bid should be rejected.

The BHP-Mitsui combine may have its reasons - pitiable condition of the works and uncertainties dogging the world steel scene may be among them - for showing interest only in the iron ore mines. But technically, its response goes against the spirit of th e EoI notice.

Is it, therefore, not time for the Ministry and SAIL to take new initiatives? Already, nearly five years have been lost pursuing this route.

Several studies done by Dasturco earlier, including one at the instance of IDBI, the operating agency, suggest that it is possible to modernise the works in instalments with relatively small capital outlays.

The substantial clean-up of the IISCO balance sheet, as a result of the Centre's financial restructuring package for SAIL, afforded an opportunity to the Ministry to think afresh. But, it persists in its stance that it cannot provide funds, although it i s giving financial support to PSUs for VRS.

The Centre is the indirect owner of IISCO through SAIL. Today neither the Steel Minister nor the Steel Secretary nor any of SAIL's wholetime directors cares to visit the works. Also, the IISCO board now does not have on it any member from the company.

This unusual situation is due to the fact that despite its being a Rs 900 crore turnover outfit with a 24,000 workforce, it is headed by an executive director.

The Ministry has before it the case of Visvesvaraya Iron & Steel, which was brought under SAIL at the initiative of the former Prime Minister, Mr H.D. Deve Gowda. As compensation, SAIL was allowed commensurate relief from the Steel Development Fund.

This course remains open to the ministry. New Delhi can also provide guarantees for funds from FIs for a minimum update, to start with.

Of course, the question of considering such options will arise only if it wants to rescue the company and honour the revival commitments made to Parliament, starting from July 14, 1972, when it took over the management. Or else, its only other option is to shut down the works, incurring the wrath of the 24,000 workforce. Does it have the guts to do that?