New Delhi, Dec 8 (IANS) In a classic case of how political interference is pushing public sector enterprises into taking senseless investment decisions, it now comes across that country’s largest public sector steel maker Steel Authority of India Ltd (SAIL) has lost its entire investment made in acquiring Malvika Steel in erstwhile Congrees stronghold of Amethi.
The latest report of official auditor Comptroller and Auditor General (CAG) presented in Parliament has highlighted the fact that Sail’s acquisition of the Uttar Pradesh based steel maker turned “idle investment” soon after and the PSU lost its entire investment of Rs 366 crore made to revive the sick entity.
The acquisition during UPA II had raised many eyebrows even then as revival of Malvika steel using SAIL was seen as a political ploy to please the people of the constituency and sell the idea as a great exercise towards job creation and industrialisation of the town.
Amethi has remained a congress strong hold for a long time and has been represented by four members of the Nehru-Gandhi family including Sanjay Gandhi, Rajiv Gandhi, Sonia Gandhi and Rahul Gandhi. However, this safe Congress bastion was breached by Smriti Irani of BJP in the 2019 general election.
Sources said that SAIL was not keen to takeover Malvika Steel when idea was floated as the operations in UP was far from iron ore and coal sources and steel making at the facility would have been expensive. However, sound business decision gave way to political pressure to justify the investment.
It now comes across that SAIL was right all the time not to buy Malvika Steel. Even at the time of acquisition, the inoperative facility of the entity had turned into scrap. The CAG has said SAIL acquired plant and machinery for Rs 44.35 crore but all of it became idle and scrap.
A committee constituted to recommend the utilisation/disposal of these idle assets found (November 2015) that most of the items were lying idle since 1998 (approximately 17 years) and were scrap in nature and not fit for revival for any of the units. The condition of the materials was deteriorating with the passage of time and there was a dense growth of bushes all around.
Further, there may have been loss of material due to theft. The Committee further recommended that the items may be put up to the Apex committee for declaring them idle assets. The assets however could not be disposed off even after 10 years of acquisition and lay as scrap, the committee noted.
SAIL acquired (February 2009) the assets of erstwhile Malvika Steel Limited (MSL (closed since 1998) consisting of 739.65 acre land and plant & machineries for Rs 226.67 crore. It invested Rs 93.75 crore to convert the facility to a steel processing unit. The idle investment also resulted in annual interest cost of Rs 27 crore (Rs 264 crore up to December 2018).
CAG has noted that SAIL management installed a TMT bar mill, Crash Barrier mill and GC mill but failed to start production from the Steel Processing unit (SPU) even after lapse of three to eight years from their installation. The TMT bar mill though completed in October 2014 was no operationalised because funds, raw materials and equipment required to start production were not provided. Failure to start production from the SPU even after lapse of three to eight years from their installation led to idle investment.
Since the acquisition of MSL, SAIL has spent Rs 45.09 crore (as of June 2018) (Rs 30.42 crore towards security expenses, Rs 8.79 crore towards employee expenses and Rs 5.88 crore towards other expenses). The Management replied that CISF was engaged for the security of the infrastructure while employee expenses were incurred for installation and upkeep of the newly erected units. Thus, expenditure was being incurred on the SPU despite zero production.
Interestingly, land title has not yet been transferred in the name of Sail even today, preventing the steel maker to monetise these assets.
(Subhash Narayan can be contacted at email@example.com)