Talk:IISCO Steel Plant

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IISCO was taken over by the government on 14th July (not 4th July) 1972. I have checked several sources. There is a slip on the SAIL official website. P.K.Niyogi 13:06, 19 June 2006 (UTC)

Looking back at IISCo Burnpur

To an IISCo loyalist like myself who was in service in the Company from 1950 to 1978, and associated with project & development work all along, the news of Cabinet approval for merger of IISCo with SAIL was exciting news. The credit for this happy development should go to the present Minister for Steel, Shri Ram Vilas Paswan. Regrettably his predecessors, including some from West Bengal, did precious little for ailing IISCo, the unwanted subsidiary thrust upon SAIL by the Govt. . In the fifties, Burnpur Works, a half million tonne steel plant, was expanded under the 1953 and 1955 Extensions to a capacity of one million tonnes ingot steel including 800,000 tonnes of saleable steel. The project was funded mostly from the Company’s internal resources and with limited assistance (20 to 25 %) of foreign exchange loan from the World Bank to cover the import content. In 1953 when the World Bank agreed to advance a loan of US $ 31.5 million, it was the first such occasion when the IBRD granted a loan to a private company. It was truly an astonishing performance that Burnpur Steel plant achieved full rated capacity within the first two years of project completion and sustained a high capacity utilisation of plus 90 % for six years in a row from 1960-61 to 1965-66. By comparison, the public sector steel plants (Bhilai, Rourkela, Durgapur and Bokaro) took decades to attain anywhere near 90 % of rated capacity and that too after the proclamation of Emergency! IISCO’s achievement was also remarkable considering that it was a tightly designed plant without any built-in cushion in its rated capacity, unlike Bhilai for instance. IISCo Expansion was completed on schedule and within projected cost. A little known fact is that the Company received a kind of show cause notice from GOI for producing 1.02 million tonne ingot steel, exceeding the plant’s rated capacity of one million tonne by 20,000 tonnes in 1962-63.

During IISCo Expansion in the fifties and sixties and the following years, IISCo received step motherly treatment from the bureaucracy. The Govt was totally apathetic towards the Company and viewed its ascendancy as a threat to the upcoming public sector steel plants. Another factor was that the bureaucrats resented the presence of a number of foreigners on the rolls of IISCo during that period. The engagement of foreign consultants (the International Construction Co) by IISCo was not at all to the liking of the Govt. and became a contentious issue.

The World Bank loans were fully repaid in due time. IBRD was much impressed by IISCo’s outstanding performance. The World Bank was receptive to the Company’s plan for self-sufficiency in its requirement of coking coal (6000 tonnes / day) through the Colliery Development project relating to IISCO’s captive mines at Jitpur and Chasnala. The World Bank sanctioned a loan of US $ 19.5 million in 1964 to cover the F.E. requirement for this project, estimated to cost Rs 23 crores. However for various reasons including unidentified geological fault in the deep mine, this project implementation was behind schedule; project cost was reappraised at Rs 40 crores in 1968. The Govt rejected the Company’s request for rescheduling repayment of World Bank loan, although the World Bank was receptive to the Company’s proposal. As such the World Bank loan for the Chasnala-Jitpur collieries project had to be fully repaid while the project was still incomplete and earning no return, which put the Company to a serious financial strain.

In the late sixties, IISCo was overwhelmed by acute liquidity crisis arising from: i) Fall in production at Burnpur due to backlog of maintenance, lack of vitally needed spares & components and serious labour trouble ii) Burden of repayment of World Bank loan for Colliery Development and further compounded by Rupee devaluation (1966) iii) Non-remunerative steel pricing as determined by the Govt. (applicable to all producers).

Chasnala colliery was supposed to be a gold mine and the Company had launched an ambitious project to developed it into a large, fully mechanised, modern mine with state of the art technology. Unfortunately, Chasnala proved to be IISCo’s undoing, leading to its take-over by the Govt in July 1972. A further blow was struck in December 1975 when an accident flooded the deep underground mine causing death of nearly 400 miners apart from the entire underground plant and equipment being washed out and buried. Chasnala mine disaster was a cruel blow of fate from which the Company could never recover. It is difficult to imagine what would have been the Govt’s course of action if such a devastating tragedy had occurred while IISCo management was still under Sir Biren Mookerjee. He was spared the blame and ignominy. (Technically the disaster took place because of incorrect but certified Mine Abandonment Plan when IISCo took over the abandoned, old type inclined workings at Chasnala colliery several years ago from the previous owners)

In fifties, the allocation of coal from a designated mine / mines to a steel plant and also the allocation of railway wagons depended upon the pleasure of the Coal Controller. In this situation, IISCo apprehended that its precious Chasnala coal could be diverted to Bhilai or some other public sector steel plant by obliging bureaucrats. It was to guard against such a possibility, that the Company did not ask for a Railway siding at Chasnala washery and instead conceived of a 54 km long Ropeway connecting the washery directly to Burnpur Works at a cost of Rs 10 crores. It is another matter that this prestigious Ropeway built by German firm PHB was beset with operational problems arising from technical snags, unsatisfactory power supply from BSEB at the intermediate transfer stations, and wanton damage by miscreants for theft of coal all along the way. For this reason IISCo’s idea of remaining independent of other coal mines and wagon allotment for coking coal by Govt agencies was not realised.

Concurrently, with the Colliery Development project, the Company had also envisaged the Phase I scheme (later called the Balancing of Plant (BOP)scheme) to increase the capacity of Burnpur Works to 1.3 million tonnes of ingot / liquid steel. This idea was based on the expected increase in blast furnace production arising from use of high grade coking coal from Chasnala & Jitpur collieries, together with some technological improvements in plant operation. Phase I scheme also envisaged augmentation of the captive Power plant of 60 MW installed capacity at Burnpur Works, but was deleted on the Govt’s insistence on taking power from Damodar Valley Corporation (DVC), despite the Company’s unsatisfactory experience with DVC. The B O P proposal received strong endorsement from the World Bank who offered a loan of USD 30 million for the project in 1962. Among other additions, the B.O.P. scheme included a 300,000 tonne/annum continuous casting plant.

In addition to the above project loan, the World Bank also offered a loan of USD 9 million for import of spares and components urgently needed by the Burnpur Works. Govt of India approved this only in 1966 after loss of four years in appraisal. Even afterwards, the required import licenses were not being released for one reason or the other. At this stage, the World Bank decreed that before any funds could be released, the Company must obtain all import licenses. This stipulation became a stalemate, which eventually led to the cancellation of the World Bank loan in 1969.

With deteriorating plant condition for lack of spares and maintenance, daunting problem of labour indiscipline and liquidity crisis, production at Burnpur Steel plant kept on falling from 1967-68 and came to 45% of the plant capacity in 1972-73. This led to IISCo being taken over by Govt of India in July 1972.

Since then IISCo has been kept on oxygen by capital inputs under the Plant Rehabilitation scheme (PRS) and additional inputs sanctioned under Annual Plan outlay from year to year. Talk of IISCo expansion has been going on for years. The initial draft proposal for a two million tonne steel plant was outlined by the Company’s own Plant Engineering & Development Division (PEDD, headed by the writer) This was followed by detailed Feasibility Study reports by 3 different agencies viz Dasturco, the Russians GIPROMEZ and the Japanese Consortium. These exercises have been going on for years without any action beyond levelling the site for plant expansion at former slag bank. There was a furore over overtures by London based Swaraj Paul to take over IISCo and later by Mukand Steel of Viren Shah. Such moves were cold shouldered by the Central and State Govts. The only proposal that kindled real hopes for IISCo was the Japanese proposal for two million tonne steel plant, which according to them was the minimum viable capacity and they had offered loan and participation in the project. It is to the credit of SAIL’s former Chairman Shri V Krishnamurthy that the Japanese proposal was actively pursued and brought to the stage of PIB approval. After his departure, the proposal went into a limbo due to apathy of Govt and SAIL.

This article should not be seen as an obituary of IISCo. On the other hand, there are hopeful signs of rejuvenation of IISCo with the news of the IISCo-SAIL merger. The dark era of License and Quota Raj is happily a thing of the past. From the early 90s, there has been a healthy attitudinal change in the mindset of the government and the bureaucracy towards industry in particular. The economy is booming, the Sensex is scaling new peaks; exports are registering an upward growth and India is hopeful of becoming a world power in the near future. Steel prices appear to be highly remunerative and SAIL is flush with funds. Even ailing IISCo has made a book profit during the financial year 2004-05. So it fervently hoped that decisions would be taken soon on the Feasibility Report on IISCo Expansion/Modernisation prepared by the Japanese consortium without wasting precious time on yet another feasibility study.

Nothing would please those who invested long years of their working lives with IISCo more, than to see it perform efficiently and make its contribution to a resurgent India.

July 15, 2005 J A Deshpande Former Chief Executive, Projects & Development,Indian Iron & Steel Co Ltd.(Member of IISCo family: 1950 – 1978)

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BetacommandBot (talk) 13:51, 21 January 2008 (UTC)