India’s ministry of steel is likely to revisit the option of merging government-run steel mills Rashtriya Ispat Nigam Limited (RINL) and NMDC Steel Limited with Steel Authority of India Limited (SAIL), to create a single steelmaking behemoth, government sources said on Thursday, March 28.
However, the sources were quick to add that any consideration of such an option will be taken by the new government that will take assume charge after the national elections end in June.
According to the sources, ever since the government put the privatisation of RINL and NMDC Steel Limited on the backburner in the face of political opposition, various political parties, associations of employees at steel companies and even independent sectoral analysts have been advocating such a merger which would ensure synergies and scale of operation as well as resolve various issues currently being faced by the steel companies individually.
Citing an example, government officials said that RINL is the only large steel producer in the country which does not have any captive raw material resources and is dependent on merchant procurement of raw materials, which entails higher working capital requirements and makes operations uncompetitive vis-à-vis a steel mill with captive raw material resources.
At the same time, NMDC Steel Limited enjoys iron ore linkages with its parent NMDC Limited, while SAIL has its own captive iron ore mines and a merger of the three companies will ensure raw material security for RINL.
Alongside, NMDC Steel’s recently commissioned 3 million mt mill in Nagarmar in the central state of Chhattisgarh is primarily a flat steel producer and a merger with RINL, an exclusively long product company, would ensure an expanded product portfolio, ensuring increased competitiveness, and would de-risk category-wise market fluctuations in prices, the sources said.
Also, the merged entity will have a combined installed capacity of 30.3 million mt, making it the largest steel producer in the country, entailing efficient economies of scale and reductions in costs.