Rollout of Rs 44,500-cr worth steel projects behind schedule

NEW DELHI: Half of the ongoing projects in the steel sector, that cost Rs 100 crore or more, are running behind schedule as of February-end, at a time when the Centre is pushing for faster execution of infrastructure projects to boost the economy.

According to the ministry of statistics & programme implementation (MoSPI)���that monitors core sector projects���the delay in execution of 14 of the total 28 projects worth Rs 44,500 crore could lead to substantial cost escalation. The rise in cost could be a whopping Rs 6,000 crore.

According to data available with MoSPI���s project implementation department, major projects that reported delays include the expansion of Rourkela Steel Plant at an estimated cost of Rs 6,133 crore and the development of Bhilai Steel Plant that would have cost Rs 5,185 crore. Both the plants belong to the country���s largest steelmaker SAIL. The firm���s annual producing capacity is close to 13 million tonnes, which it intends to scale up to 26 million tonnes by 2012.

Some of the projects in the steel sector, such as the work at Rashtriya Ispat Nigam, have already reported slippages by more than four years. An RINL official said: ���We were to import certain equipment to redesign a mill. Delay in import of this equipment has caused some delay in commissioning of the additional capacity by 7-8 months. The new capacity will be commissioned in the first half of 2011, instead of 2010-end.���

RINL currently produces 3.4 million tonnes of steel at its Vishakhapatnam facility, which it intends to scale up to 6.3 million tonnes by 2011. It is targeting 8 million tonnes of capacity by 2013.

Project authorities have cited retendering or rescheduling of award of contracts and problems in procuring equipment and raw materials as hurdles in timely implementation of projects. Some officials maintain the delay would not lead to cost overruns and instead it could be lowered to an extent.

���There has been a major correction in prices of key raw materials and equipment meant for producing steel in the second half of 2008, which led to a series of fresh negotiations between steel producers and raw materials and equipment suppliers. Steel companies are now awaiting a fair-price deal and will reschedule their projects accordingly,��� said an executive with a leading public-sector steel firm. Some of the major equipment suppliers are based in Australia, China and the US.

A committee of secretaries headed by Cabinet secretary KM Chandrashekar is keeping a close watch on implementation of projects and is laying special thrust on the steel sector.

���Project authorities have reported problems in implementation and we are now looking at addressing these issues in consultation with the stakeholders,��� said a government official.

The committee of secretaries has already taken steps like setting up standing committees in ministries or departments to fix responsibility for any delays, appointment of nodal officers for each project and have issued guidelines on standard bidding documents to prevent further delay in imports.

Companies may now like to hasten implementation of these plants as steel has shown some pick-up in demand. Indian steel producers reported sales growth of 3.9% in the March quarter as against production growth of 0.5%, showing inventory liquidation during the quarter.