The steel ministry is planning to set up a special arm under SAIL to spearhead overseas acquisitions, particularly in the mining sector
Likely to be named SAIL Videsh, the move comes in the wake of the existing special purpose vehicle, International Coal Ventures (ICVL, which is a joint venture between SAIL, NMDC, RINL, NTPC and Coal India, failing to make much headway in procuring coal assets abroad during the past two years.
The proposal to create SAIL Videsh, as a subsidiary of the steel major, is being examined in the Steel Ministry, sources in the know said, adding a final decision is expected soon.
“The ministry is examining either to wind up ICVL or revamp it and make it a 100 per cent subsidiary of SAIL and ask NMDC, NTPC, RINL, CIL to leave the SPV,” a source added.
When contacted, Steel Secretary Atul Chaturvedi said, “the ministry is examining options to restructure ICVL or to give a new shape to it because in the present form it has not achieved desired progress. So we are examining how we can resolve its structural and decision-making deficiencies.
The bottomline is that we have to acquire raw materials resources abroad. There is and should be no compromise in achieving that objective.”
ICVL was formed to acquire thermal and coking coal properties abroad in 2008 with a corpus of Rs 10,000 crore, with SAIL being the major contributor. The Steel Ministry is its administrative ministry.
SAIL may pull out of shipping JV with SCI
In another development, SAIL may pull out of a proposed joint venture (JV) with Shipping Corp. of India Ltd (SCI) after the shipping ministry set conditions that it says make the JV ‘unworkable’.
Government representatives on the board of SCI, also stateowned, had asked the company to get the ministry's approval for the venture, which was meant to provide shipping services to the steel maker. The Union government owns 80.12 per cent of SCI.
The JV company was to start operations with an initial fleet of eight dry-bulk carriers that can transport up to four million tonnes (mt) of cargo. SAIL imports around 12 mt of coking coal a year, mostly from Australia, to fire its steel plants and pays a shipping bill of close to $300 million (around Rs1,400 crore).
The shipping ministry, however, has restricted its clearance for the JV firm to a cargo of 1 mt. This requires just two ships.
Secondly, the ministry has told the JV firm to go for market-determined rates for transporting the cargo as against the cost-plus rates suggested by SAIL and SCI. Cost-plus rates refer to the cost of operating a ship, including interest, insurance, crew wages, fuel and port calling costs, plus an 8-10 per cent return on investments.
The boards of SCI and SAIL had agreed to the cost-plus model so the venture could earn a reasonable return on investments and distribute dividends.
Thirdly, the ministry wants the JV firm to use only Indian registered ships, either owned by the venture or by SCI, to transport the cargo. It also said the JV firm should use SCI’s staff and not incur expenses on recruiting staff or hiring premises. “SAIL now says that it is not interested in the joint venture as the conditions set by the shipping ministry makes it unworkable,” an SCI executive said. The company has told SAIL it would try to get the conditions removed.
A SAIL executive confirmed the development. Both the executives did not want to be identified.
A shipping ministry official said the venture has been given approval subject to the conditions.
The board of SCI is likely to discuss the issue at its next meeting. “We are hopeful of sorting out the issue,” said UC Grover, a director looking after technical and offshore services at SCI.
Interestingly, both SAIL and SCI are so-called navratna firms, a tag that gives full financial autonomy to a public firm for capital expenditure, JVs, modernization and purchase of equipment.
“This case clearly demonstrates that business decisions of navratna companies continue to be dictated by the government,” said an executive with a Mumbai-based shipping consultancy firm. He did not want to be named because he is not authorized to speak to the media.
SAIL currently uses a combination of spot and long-term hiring of ships for one-five years to manage its annual shipping costs.
Strong show by SAIL dealers
The over 2,000-strong countrywide dealer network of Steel Authority of India has performed in an exemplary manner during the first nine months of the current financial year by achieving 4.17 lakh tonnes of sales – a YoY growth of 23% – and registering double-digit growth in each of the four regions. SAIL dealers mainly market the company’s branded products such as SAIL-TMT and SAIL-Jyoti. In recent months, light structurals have also been added to their product basket.
In December ’09 alone, sales through the dealer network were a record 1.16 lakh tonnes, a growth of 210% over December ’08. This contributed substantially to SAIL’s overall domestic sales of nearly 1.4 million tonnes during the month which grew 32% over December 2008. During October-December (Q3) ’09, too, SAIL sold a record 1.94 lakh tonnes through its dealer network, showing a YoY growth of 104 per cent.
In a span of a little over 3 years, these brand ambassadors of SAIL have steadily helped the company to consolidate its position throughout the country, particularly in the interior areas, enabling the common man to have easy access to quality steel materials of general use in construction. With ‘Shahar se gaon tak’ as its objective, SAIL aims to market over 1 million tonnes of branded products through its dealer network during the coming
financial year.
Likely to be named SAIL Videsh, the move comes in the wake of the existing special purpose vehicle, International Coal Ventures (ICVL, which is a joint venture between SAIL, NMDC, RINL, NTPC and Coal India, failing to make much headway in procuring coal assets abroad during the past two years.
The proposal to create SAIL Videsh, as a subsidiary of the steel major, is being examined in the Steel Ministry, sources in the know said, adding a final decision is expected soon.
“The ministry is examining either to wind up ICVL or revamp it and make it a 100 per cent subsidiary of SAIL and ask NMDC, NTPC, RINL, CIL to leave the SPV,” a source added.
When contacted, Steel Secretary Atul Chaturvedi said, “the ministry is examining options to restructure ICVL or to give a new shape to it because in the present form it has not achieved desired progress. So we are examining how we can resolve its structural and decision-making deficiencies.
The bottomline is that we have to acquire raw materials resources abroad. There is and should be no compromise in achieving that objective.”
ICVL was formed to acquire thermal and coking coal properties abroad in 2008 with a corpus of Rs 10,000 crore, with SAIL being the major contributor. The Steel Ministry is its administrative ministry.
SAIL may pull out of shipping JV with SCI
In another development, SAIL may pull out of a proposed joint venture (JV) with Shipping Corp. of India Ltd (SCI) after the shipping ministry set conditions that it says make the JV ‘unworkable’.
Government representatives on the board of SCI, also stateowned, had asked the company to get the ministry's approval for the venture, which was meant to provide shipping services to the steel maker. The Union government owns 80.12 per cent of SCI.
The JV company was to start operations with an initial fleet of eight dry-bulk carriers that can transport up to four million tonnes (mt) of cargo. SAIL imports around 12 mt of coking coal a year, mostly from Australia, to fire its steel plants and pays a shipping bill of close to $300 million (around Rs1,400 crore).
The shipping ministry, however, has restricted its clearance for the JV firm to a cargo of 1 mt. This requires just two ships.
Secondly, the ministry has told the JV firm to go for market-determined rates for transporting the cargo as against the cost-plus rates suggested by SAIL and SCI. Cost-plus rates refer to the cost of operating a ship, including interest, insurance, crew wages, fuel and port calling costs, plus an 8-10 per cent return on investments.
The boards of SCI and SAIL had agreed to the cost-plus model so the venture could earn a reasonable return on investments and distribute dividends.
Thirdly, the ministry wants the JV firm to use only Indian registered ships, either owned by the venture or by SCI, to transport the cargo. It also said the JV firm should use SCI’s staff and not incur expenses on recruiting staff or hiring premises. “SAIL now says that it is not interested in the joint venture as the conditions set by the shipping ministry makes it unworkable,” an SCI executive said. The company has told SAIL it would try to get the conditions removed.
A SAIL executive confirmed the development. Both the executives did not want to be identified.
A shipping ministry official said the venture has been given approval subject to the conditions.
The board of SCI is likely to discuss the issue at its next meeting. “We are hopeful of sorting out the issue,” said UC Grover, a director looking after technical and offshore services at SCI.
Interestingly, both SAIL and SCI are so-called navratna firms, a tag that gives full financial autonomy to a public firm for capital expenditure, JVs, modernization and purchase of equipment.
“This case clearly demonstrates that business decisions of navratna companies continue to be dictated by the government,” said an executive with a Mumbai-based shipping consultancy firm. He did not want to be named because he is not authorized to speak to the media.
SAIL currently uses a combination of spot and long-term hiring of ships for one-five years to manage its annual shipping costs.
Strong show by SAIL dealers
The over 2,000-strong countrywide dealer network of Steel Authority of India has performed in an exemplary manner during the first nine months of the current financial year by achieving 4.17 lakh tonnes of sales – a YoY growth of 23% – and registering double-digit growth in each of the four regions. SAIL dealers mainly market the company’s branded products such as SAIL-TMT and SAIL-Jyoti. In recent months, light structurals have also been added to their product basket.
In December ’09 alone, sales through the dealer network were a record 1.16 lakh tonnes, a growth of 210% over December ’08. This contributed substantially to SAIL’s overall domestic sales of nearly 1.4 million tonnes during the month which grew 32% over December 2008. During October-December (Q3) ’09, too, SAIL sold a record 1.94 lakh tonnes through its dealer network, showing a YoY growth of 104 per cent.
In a span of a little over 3 years, these brand ambassadors of SAIL have steadily helped the company to consolidate its position throughout the country, particularly in the interior areas, enabling the common man to have easy access to quality steel materials of general use in construction. With ‘Shahar se gaon tak’ as its objective, SAIL aims to market over 1 million tonnes of branded products through its dealer network during the coming
financial year.
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