Financial Daily from THE HINDU group of publications
Tuesday, Dec 10, 2002
Logistics - Railways
`We will put Railways on savings track' Mr V. Gujral, Vice-Chairman & CEO, Jindal Steel
Rabindra Nath Sinha
KOLKATA, Dec. 9
IN a matter of months from now, a private sector company will begin manufacturing rails. It is true that the company, Jindal Steel & Power Ltd (JSPL), will not be the country's first private sector manufacturer of rails. This is because several years ago Ispat Profiles Ltd had earned this distinction. But Ispat Profiles never made the mark and is no more in the reckoning. Therefore, JSPL's project hogs the limelight. What is more, JSPL, which will pose competition to SAIL's Bhilai Steel Plant, will offer the Indian Railways (IR) 120-metre-long rails, sharply contrasting the rails of much shorter length traditionally in use on IR's tracks.
Mr V. Gujral, Vice-Chairman & CEO of JSPL, recently responded to questions from Business Line on the relevance of the project. The following are excerpts from the interview.
What prompted JSPL to decide to manufacture rails?
The urge to increase its portfolio of value-added products, products that are crucial for development of infrastructure, particularly the transport segment.
The Rail and Universal Beam Mill coming up as part of Jindal Steel's existing complex at Raigarh,Chhattisgarh
What are the distinctive features of the new facility?
The Rail & Universal Beam Mill, which JSPL is putting up in its existing complex at Raigarh in Chhattisgarh, has been procured from ISCOR of South Africa. The mill, before its closure, was part of ISCOR's Pretoria works. It is equipped to make 120-metre the world's longest finished rails. It will be the first of its kind to be installed in India.
Apart from rails, it can manufacture parallel flange beams and columns in medium and heavy sizes and sheet piles. With upgradation, it will ensure optimum management of production cycle. The additional facilities are for steel melting, primary de-scaling, automation, automatic stamping, non-destructive testing, rail-end straightening and laser measurement. There is provision for continuous on-line inspection for quality control. JSPL is also installing an integrated long rail flash butt welding line to produce 240-480 metre-long welded rail panels.
SAIL's Bhilai Steel Plant, the only producer of rails, currently makes 13-26-metre-long rails. It has undertaken several schemes for modernisation and upgradation for manufacturing 65- and 78-metre-long finished rails in 60 kg/m and 52 kg/m respectively.
How will IR benefit from JSPL's venture?
With the availability of 120-metre-long rails from JSPL, there will be a drastic reduction in weld population to only 17 welds from 160 welds per track km presently. This will result in direct savings to IR. The other benefits will be in terms of enhanced track reliability/safety and prolonged rail life. The quality of IR's tracks will be at par with those in the advanced countries where trains run at more than 300 km per hour. Moreover, direct transportation of long welded rail panels at IR's construction site will eliminate the need for multiple handling of rails. Which again means saving in costs.
What will be JSPL's likely share in IR's orders?
Owing to non-fulfilment of annual replacement requirements, IR already has to reckon with a backlog of 12,260-track km. You are aware that IR set up in 2001-02 a Rs17,000-crore non-lapsable Railway Safety Fund for replacement of over-aged tracks, bridges, rolling stock and signalling system. IR's additional requirement of rails for the duration of the new programme is placed at 2,00,000-2,50,000 tonnes per annum. JSPL hopes to meet this additional demand.
What will be JSPL's pricing strategy for rails?
I have already explained the gains that are to accrue to IR from the use of 120-metre-long rails. All I can say is that we will devise an appropriate pricing strategy.
Any proposal to export rails?
We are confident of meeting internationally prevalent specifications, such as, UIC, BS, GOST, SAS, AREA, JIS, etc. We want to tap markets in South-east Asia, West Asia and Africa for sections comprising, but not necessarily limited to BS 75 lbR, BS 90 lbA, AREA 136 lb JK, UIC-54 and UIC - 60. Naturally, much will depend upon importers' requirements. We are already receiving inquiries from outmarkets.
What is the project cost? How is it being funded?
The capital outlay for the 7,50,000-tonne Rail & Universal Beam Mill is Rs 396 crore. It has a debt-equity ratio of 1.25:1. The lenders are Punjab National Bank, Canara Bank, Indian Overseas Bank and SBI. The company is effectively utilising internal resources to keep its borrowing low.
Any time and cost over-run?
The project work is proceeding on schedule. MECON, which is the lenders' engineer, has confirmed adherence to time and cost projections. It is slated to go on stream in the first quarter of 2003. Approval from IR's Research Design & Standards Organisation in Lucknow will be sought in due course.
What are JSPL's future plans? Please list the existing units at Raigarh...
JSPL believes its core strength lies in sponge iron, steel and power. It wants to continue its focus on these areas. Currently, power is generated using process waste gases and coal washery rejects. There is no plan to hive off the existing power business; but the group outfit, Jindal Power Ltd, proposes to promote a 550-MW facility at Raigarh as an independent power producer. For its 6,50,000-tonne coal-based sponge iron unit, it has captive coal mines in Chhattisgarh and iron ore mines in Orissa. The company commissioned a 351-cubic-metre mini-blast furnace in April and 25-lakh-tonne capacity coal washery in July this year. It hopes to sign a MoU soon with the Orissa Government for putting up facilities for sponge iron, steel, ferro alloys and power generation.
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