CAG flags financial loss due to SAIL's poor inventory management from 2016-23

The Comptroller and Auditor General (CAG) of India has flagged discrepancies in inventory handling practices of Steel Authority of India Limited (SAIL) from 2016-2023. According to the auditor's report tabled in the Rajya Sabha on Tuesday, this led to loss of time and money at the public sector undertaking during this period.

CAG found that faulty price fixation adopted by SAIL in the agreement for sale of Blast Furnace slag (a byproduct of steel making) was detrimental to the financial interest of the Company. Sale of slag at a lower rate resulted in inability to earn revenue of Rs 441.40 crore during 2015 to 2023.

“Market price of slag was between Rs 500 and Rs 1,220 per tonne during 2009-14, whereas the rate provided in the agreement was between Rs 336.65 and Rs 444.24 per tonne,” a CAG statement said. The slag in question was provided by Bokaro Steel Plant during this period.


Highlighting another anomaly, India’s supreme audit institution said SAIL had not fixed any benchmark for inventory carrying cost per tonne of raw material, semi-finished material and finished goods. This is even though on an average, SAIL had an inventory of Rs 21,698 crore during 2016-17 to 2022-23 which constitutes about 67 per cent of its current assets.

SAIL also failed to maintain stock levels of raw materials like iron ore, coke, sinter due to which Blast Furnace was put under off-blast state resulting in inability to produce Hot Metal of 9.32 lakh tonnes and to earn potential revenue of Rs 1,231.52 crore at Rourkela, Bokaro and Durgapur Steel Plants, the auditor noted.

According to the CAG, while all the five integrated steel plants of SAIL have implemented SAP-ERP system, the same was yet to be implemented in all units or offices of SAIL. “The IT systems in each Plant were running in isolation which led to various control issues like non-availability of real time data on stock of raw materials, absence of centralised vendor database and manual intervention in SAP-ERP system,” the auditor said.

Besides these, the stock verification report was not prepared as prescribed in the guidelines on stock verification of the Central Marketing Organisation. “In 46 out of 49 stockyards, stock verification was not conducted on half yearly basis, as prescribed in the policy, in one or more years during 2016-17 to 2022-23,” the CAG said while adding in 10 stockyards, stock verification had not been conducted at all during this period.