SAIL’s Salem unit sale hits a block

The earlier idea to privatise the Steel Authority of India Ltd’s (SAIL’s) stainless steel unit at Salem in Tamil Nadu might get delayed.

Land and employee union issues, besides opposition from the state government, might put a spanner in the central government’s (the central government owns SAIL) decision.

The process has begun to select transaction and legal advisors and an asset evaluator for the strategic sale. It is learnt the last date for expression of interest for the transaction advisor has been extended twice, as only a single entity had participated. The advisor here would advise on modalities and timing of strategic disinvestment of this unit and two others, too, where a sale decision was taken. And, prepare a detailed operational scheme to implement the process.

Of the land with the plant, about half is not freehold and is another obstacle, say sources.

Also last month, Chief Minister E Palaniswami wrote to Prime Minister Narendra Modi that the move would cause “considerable unrest” among people whose lands were acquired for the unit. He said locals have a “deep sense of pride and attachment” to the unit. Which provided employment to 2,000 people.

According to a private company executive who did not wish to be named, businesses are likely to stay away till these issues are resolved. Some media reports had suggested Jindal Stainless was keen on buying stake in the Salem unit, though there has been no official word.

Besides Salem, the central government had decided for strategic disinvestment of SAIL’s Alloy Steels Plant at Durgapur in West Bengal and the Visvesvaraya Iron and Steel Plant in Bhadravati, Karnataka. The government has budgeted to raise ~15,000 crore from strategic disinvestment in 2017-18.

An unnamed critic of the decision on Salem said it was one of the better plants of the state-owned company and required only better management to run efficiently. “It is functioning at 3540 per cent of its total capacity and is not overstaffed, unlike SAIL’s other units,” the critic said.

The Salem plant is spread across 4,000 acres and supplies wider width stainless steel sheets/coils, where the yearly installed capacity is 70,000 tonnes in the cold rolling mill and 364,000 tonnes in the hot one. Its steel melting shop can produce 180,000 tonnes of slabs a year. In addition, it has a stainless steel blanking facility with a capacity of 3,600 tonnes a year of coin blanks and utility blanks/circles.