NEW DELHI State-run Steel Authority of India Ltd (SAIL) has earmarked 40 billion rupees ($600 million) for capital expenditure in the 2016/17 fiscal year and expects its annual sales to grow by more than 10 percent.
SAIL, India's biggest state-owned steel company, is trying to cut costs by producing more from its new efficient units and by adding value to its product line, Chairman Prakash Kumar Singh told Reuters in an interview.
"We're are going to cut down production from the inefficient units," Singh said.
SAIL has already closed some unproductive units such as the blast furnace at its Rourkela plant in eastern India, as it has embarked on a 600 billion rupee modernisation and expansion plan.
The company aims to produce 20 million tonnes of steel by 2018/19. Crude steel production was 14.3 mln tonnes in the year to the end of March 2016
Steel Minister Chaudhary Birender Singh last month asked SAIL to reduce costs, increase efficiency and exercise better capacity utilisation.
Margins of domestic steelmakers, including SAIL, have been hit due to a flood of cheap imports, especially from China.
The company swung into the red in its fiscal year to March 2016, posting a loss of 41.37 billion rupees, compared to a net profit of 21 billion rupees in the previous year. Its nearly 85,000 strong workforce accounted for over a fifth of its expenditure.
Sales fell 15 percent to 385 billion rupees in the last financial year.
"Downsizing may happen over a period of time but we will not take any extreme measures," Singh said.
SAIL has allowed 1,038 employees to retire on a voluntary retirement scheme, a move that will help it save 1.03 billion rupees. (bit.ly/2aXZSPp)
About 5,000-6,000 workers will retire annually for the next two to three years, Singh said.
Local steel prices, currently hovering around 26,000 rupees ($434.46) a tonne, are not sustainable, Singh said.
"If prices keep dropping, it is difficult to make profits," Singh said.
Import curbs may, however, help SAIL raise prices and recoup losses.
India has unveiled a series of measures this week to boost its steel mills and shield them cheap overseas shipment.
New Delhi this week extended a floor price on imports of 66 steel products for a further two months and government bodies recommended safeguard taxes and anti-dumping duties on imports.
($1 = 66.7488 Indian rupees)
(Reporting By Sankalp Phartiyal; Editing by Keith Weir)
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