Apart from the severe shortage of rice, another major election issue in 1967 was the neglect of economic development of the south. DMK pointed through high decibel orations to steel plants at Bhilai, Durgapur, Rourkela and Bokaro, all located in the north constructed with liberal investments and the south suffering utter neglect. The Congress party suffered a massive defeat at the hands of the DMK in the 1967 elections.
In 1970, Indira Gandhi announ-ced in the Parliament the setting up of three steel plants at Salem, Visakhapatnam and Vijayanagar in the southern region.
IE specials on the southern steel plants...
Following a brief news report on the Prime Minister laying the foundation stone for Salem Steel Plant on 15 September 1970, just nine days earlier, IE produced a special supplement along with interviews of Dr M N Dastur, Senior Executives of Tamil Nadu Industrial Development Corporation and others involved in the proposed plant. The issue was released at a function on 15 September 1970, in which Indira Gandhi and the then TN Chief Minister Karunanidhi participated (IE released such comprehensive special supplements at the foundation-stone-laying functions at Visakhapatanam and Vijayanagar in January 1971 and October 1972 respectively).
The DMK government, new to power, had grandiose visions on an integrated steel plant at Salem based on the magnetite ore from nearby Kanjamalai. Ore samples were sent to Lurgi, Germany, which was only too happy to certify the feasibility of beneficiating the low grade iron ore to produce steel. Remember the fiasco of a similar feasibility study that was proposed for Kudremukh to beneficiate low-grade ore to feed steel plants in Iran?
The bang and the whimper…
Mohan Kumaramangalam, the then Minister of Steel and Mines, inaugurated Salem Steel Limited as a separate company in 1972 at the historic Rajaji Hall. Nothing much happened over the next four years. The dismissal of the DMK government in January 1976 and the impending elections triggered an announcement on setting up a stainless steel plant at Salem. The cold roll mill for stainless steel was ordered from Peugeot Loire, France. Under the dynamic lead of V Subramaniam assisted by young executives like S K Murthy, the Salem Steel Plant(SSP) was constructed expeditiously and was formally commissioned in 1982. Significantly, Su Thirunavukkarasar, the then TN Minister of Industry, complained: Urukkalai kettom. Uruttalai kidaithadhu(we asked for an integrated steel plant but got a tiny rolling mill).
Initially, stainless steel slabs imported from Europe were cold-rolled to produce high-quality stainless steel sheets and strips; later the slabs were procured from the Alloy Steel Plant, Durgapur. The plant was further integrated by setting up a hot rolling mill, supported by electric arc furnaces to produce steel from scrap. Today, the operations are well integrated from the stage of melting scrap to casting steel slabs, hot rolled into coils and further cold rolled into stainless steel. SSP has the capacity to handle 364,000 tonnes of hot rolled coils and 70,000 tonnes of cold rolled stainless steel per annum. Total investments made are in the region of Rs 3000 crore.
SSP’s Capacity utilisation is low, caused by higher cost of production and competition from less sophisticated re-rollers.
A Bandyopadhyay(AB), Executive Director, SSP mentioned that the problems of SSP related to marketing, availability of power and water.
“The acute power shortage and its high cost, contribute to higher costs of production. SSP utilises available power optimally to run the Steel Melting Shop (SMS) and the rolling mills. “Power is charged at Rs 7 per unit. It takes 2000 units for producing a tonne of cold rolled stainless steel; that means the power cost is Rs 14,000 per tonne whereas competitors like Jindal Steel get power at half the price. This difference on account of power cost alone is over Rs 7000 per tonne. Competitiveness is seriously affected by this huge difference,” said the Executive Director.
A power plant can help
SSP plans to setup a 2x60MW captive power plant in cooperation with Neyveli Lignite Corporation. This is expected to provide assured availability of power, and bring in significant economies as the cost is factored at just Rs 4 per unit.
With the large land area available with SSP and with Neyveli just 143 kilometres from Salem, power can be generated at favourable cost. In addition, Neyveli is cash-rich and has been a highly profitable PSU for over three decades.
IE suggests including BHEL also as a partner. SAIL Chairman, C S Verma, was an ex-Director of BHEL, which has large production facilities in TN at Tiruchi, Ranipet, Pudukottai and Chennai. Again, BHEL, a Maharatna is cash-rich and can ensure equipment supplies and erection in quick time. In fact, with the recent interest of TN on acquiring 5 per cent of shares form NLC, the state can also conceive of larger capacity power plant at Salem that can feed western parts of the state.
In the interim, SSP plans to tap surplus power produced at Bhilai that has the potential for saving around Rs 6.5 crore per annum. SSP has signed a MoU in this regard.
High cost of scrap…
The second major issue relates to the availability and high cost of scrap. Heavy scrap is transported over large distances from Bhilai. Thus, freight cost is a major factor. AB pointed to the price of scrap shooting up from Rs 19,000 to Rs 29,000 per tonne. In this the freight element alone is Rs 3000 per tonne. AB pointed to efforts to procure heavy metal scrap from Visvesvaraya Iron and Steel Limited, Bhadravathi. It can also explore the possibility of procuring scrap from the Visakhapatnam Steel Plant.
The third problem relates to water. IE suggests SSP leveraging its vast roof areas to conserve water through rainwater harvesting and to tap solar power. Companies like Saint Gobain Glass India are doing this effectively.
SSP needs to be more aggressive with regard to marketing its pro- ducts. For SAIL’s Central Marketing Organisation, located at distant Kolkata, SSP is a small part of the total tonnage it handles. For the most part, SSP has concentrated on the utensil, hospital and dairy equipment manufacturers and the railways. AB pointed to the recent focus on the manufacturers of lifts and washing machines. With huge expansion of airports and hi-rise buildings, SSP can also increase its focus on the construction sector. Incidentally, Economist House was one of the earliest to use Salem stainless steel for its front elevation. Involving architects and building planners can help.
I notice welcome activity at Salem Steel to expand its business and utility. With sustained efforts, it can impart more shine and profit to its products.