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As per some official sources, the Indian Ministry of Steel is considering the possibility of merging the government-run Steel Mills Rashtriya Ispat Nigam Limited (RINL) and NMDC Steel Limited with the Steel Authority of India Limited (SAIL) to establish a unified steel manufacturing entity. However, they noted that any consideration of such an option will be made by the new government, which will take charge following the June national elections.
According to the sources, ever since the government put the privatisation of RINL and NMDC Steel Limited on the backburner in the face of political opposition, various political parties, associations of employees at steel companies and even independent sectoral analysts have been advocating such a merger which would ensure synergies and scale of operation as well as resolve various issues currently being faced by the steel companies individually.
Government officials cited RINL as an example. RINL is the only large steel producer in the country without captive raw material resources and is dependent on merchant procurement of raw materials. This entails higher working capital requirements and makes operations uncompetitive vis-à-vis a steel mill with captive raw material resources.
At the same time, NMDC Steel Limited enjoys iron ore linkages with its parent NMDC Limited, while SAIL has its own captive iron ore mines. A merger of the three companies will ensure raw material security for RINL.
NMDC Steel’s recently commissioned 3 million metric tonne (MMT) mill in Nagarmar in the central state of Chhattisgarh is primarily a flat steel producer. The sources said a merger with RINL, an exclusively long-product company, would ensure an expanded product portfolio, increased competitiveness, and de-risk category-wise market fluctuations in prices.
Also, the merged entity will have a combined installed capacity of 30.3 MMT, making it the largest steel producer in the country, entailing efficient economies of scale and reductions in costs.
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