Gail may not gain from steel price dip

NEW DELHI: The steep slump in steel prices may cost about Rs 200-250 crore to public sector natural gas transportation major Gail India in procuring 100,000 tonne of pipes for its Vijaipur-Dadri-Bawana pipeline project. Steel prices have dipped by about 40% since the company invited a tender in September 2008 when the price was around Rs 50,000 per tonne. The tender is likely to be awarded this month.

���The bids are under evaluation and the issue of substantial fall in steel prices has been noted by Gail. Accordingly, all options available are being considered to ensure best prices,��� a Gail official told ET. The tender floated on September 18, has a validity of three months. Eight pipe manufacturers (including four foreign firms) ��� Man Industries, Welspun, Jindal SAW, PSL, Europipes (Germany), Marubeni (Japan), PCK (China), Izhora Pipe Mill (Russia) ��� have submitted their bids. ���The company has not factored in a discount clause in the tender document, while we have ensured that any increase in steel price would be passed through.

Now, the company can���t force the winning bidder to supply the product at a discounted rate due to a decline in the steel price,��� one of the bidders, who did not wish to be identified, said. The tender document says that ���the price quoted by the bidder, shall remain firm, fixed, and valid, until completion of the contract performance and will not subject to any variation.���

According to a company source, the estimated cost of Vijaipur-Dadri-Bawana pipeline project is Rs 5,492 crore. ���Gail is aiming completion by June 2009 and the compressors will be commissioned by June 2010. On completion, the capacity of Dahej-Vijaipur-Dadri pipeline would reach 78 million standard cubic meters per day (MMSCMD),��� it said.

The tendering process has come under scrutiny due to a sudden change in the steel market. The steel market witnessed a sharp increase in metal prices early this year reaching a peak of Rs 45,000-50,000 per tonne during May-June period.