The Indian government is considering a Steel Ministry’s proposal to first merge the loss-making Neelachal Ispat Nigam (NINL) with Rashtriya Ispat Nigam (RINL) and later merge the new entity with Steel Authority of India (SAIL) to create a single state-owned steel manufacturer, The Financial Express reported.
“There is scope for a merger of these companies. A detailed analysis needs to be done,” an official told the paper.
NINL incurred a net loss of Rs 378 crore, while RINL incurred a net loss of Rs 1,369 crore in FY18 due to a slowdown in the industry. Meanwhile, SAIL, the largest state-run steel maker, slimmed its losses by around 83 percent to Rs 482 crore in FY18. It reported a sales turnover of Rs 58,297 crore last fiscal, up 19 percent from FY17.
The ministry has also suggested a consolidation of profitable iron ore mining companies such as National Mineral Development Corporation (NMDC) and KIOCL, formerly know as Kudremukh Iron Ore Company.
NMDC reported a 47 percent jump in net profit at Rs 3,806 crore in FY18 and a 31.5 percent increase in revenues at Rs 11,615 crore. Meanwhile, KIOCL showed an impressive 70 percent increase in net profit at Rs 81 crore. Both these entities could be merged to create a single iron ore giant.
In April, chiefs of central PSUs in a presentation to Prime Minister Narendra Modi had proposed the creation of public sector behemoths by consolidating firms based on commonalities of functions. The chiefs argued that it would benefit the economy, increase global competitiveness and open access to cheaper capital.
They further added that an integration of central public sector enterprises (CPSEs) engaged in the same business line would limit the number of CPSEs in a sector and create profitable entities. These new entities would have the capacity to bear higher risks, take higher investment decisions and create more value for stakeholders.
Indeed bigger entities would be able to raise cheaper funds and reduce their dependence on the government.