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Mumbai , March 24

TATA Steel would be increasing the price of steel for long-term contracts by 20 per cent from April, Mr B. Muthuraman, Managing Director, said on the sidelines of the company's EGM here today.

This would translate into a price rise of roughly Rs 5,000 per tonne.

The company's current average price of steel, across categories, is estimated to be in the region of Rs 24,000 per tonne. Tata Steel had indicated earlier that it would raise prices for long-term contracts.

Ensuring security in raw material supply would be among main priorities for Tata Steel in years ahead.

Mr Ratan Tata, Chairman, told shareholders: "We are looking to be self-sufficient in raw materials. I believe there will be a time when the owners of raw materials would be the kings of this business".

The company's proposed capacity expansion would be with secure raw material supply. "It would be different from just another steel plant. We should be close to 12-15 million tonnes capacity by 2008-09," he said in this context.

The meeting passed enabling resolutions for raising up to Rs 5,000 crore and enhancing borrowing limit to Rs 10,500 crore. Tata Steel has a capital outlay of Rs 21,500 crore for the next 5-6 years.

While the proposed greenfield steel project in Orissa costs Rs 16,000 crore for its full 6-million-tonne capacity, scaling up in Jamshedpur from the current 5 million tonnes to 7 million tonnes will cost around Rs 8,000 crore.

Neither the timing of the fund raising exercise nor the instrument involved has been decided yet. Mr Tata said that should the chosen route include equity then Tata Steel's shareholders would enjoy first right.

"We have not made any statement that we would do anything at the expense of existing shareholders," he said.

On the other hand, given its decision to raise funds, the company has received offers, including at 90 basis points over Libor "which is a pretty good rate."

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