Steel Authority of India Ltd. (Photo: Facebook/@SAILsteelofficial). Image Source: IANS News

New Delhi, Sep 25 : The government's strategic disinvestment plan for the current fiscal year seems to have hit an air pocket even before takeoff. After poor investor appetite forced extension of the deadline for submission of Expressions of Interest (EoI) for public sector chopper operator Pawan Hans Helicopters Ltd (PHHL) again, the government is now considering revision of the strategic sale of special steel producing units of the Steel Authority of India Ltd. (SAIL) due to poor response.

Government sources said that closure may be considered for the strategic sale of SAIL's Alloy Steel Plant at Durgapur in West Bengal if the third EoI also failed to get any response from investors. The Prime Minister's Office (PMO), in a review has told the disinvestment department DIPAM to float EoI for Durgapur unit once again, after reviewing the exiting terms and conditions and if its not successful, it may be considered for closure.

The first EoI for the Durgapur unit came around October 2016 when no bidders were found eligible. The second EoI has come early this month after the last date of submission was extended to get better response from investors.

As part of its drive to push the strategic disinvestment plan this fiscal, the government was looking to sell 100 per cent stake in three special steel producing units of SAIL which includes - Visveswaraya Iron and Steel Plant (Bhadravati, Karnataka), Salem Steel Plant (Tamil Nadu), and Alloy Steel Plant (Durgapur), West Bengal).

Sources said that the PMO had given its approval to the sale and Department of Investment and Public Asset Management (DIPAM) had started the process of appointment of transaction advisors to conclude the deal quickly.

But with a tepid steel market that witnessed failure of several domestic steel companies, government considered to postpone the plan for the time being. With a slew of stimulus measures that has brought fresh life to the markets and India Inc., government is now hoping that its strategic sale plan may sail through.

All the units of the SAIL have been consistently making losses and sale has been considered the best option. The disinvestment of these units will be to strategic buyers to be identified through a two-stage auction process.

Companies like JSW Steel, Vedanta, Tata Steel, ArcelorMittal have been on the look-out for new assets. But it needs to be seen whether investment decisions for loss making entities in current market conditions would be a feasible option for corporates.

Visvesvaraya Iron and Steel Ltd, Bhadrawati, which was taken over by SAIL in 1997, produces alloy steel and pig iron (crude). It was started by M. Visvesvaraya, a diwan of Krishnaraja Wodeyar, the then ruler of Mysore, in 1923 under the name of Mysore Iron Works.

Salem Steel is also an old unit with SAIL that produced high grade stainless steel with utensils branded in its name being household names earlier.

The government wants to conclude the deal for SAIL units at the earliest so that the funds mobilised from the deal help it reach closer to disinvestment target of Rs 1,05,0000 crore for FY20. So far, the disinvestment proceeds have reached just about Rs 12,000 crore mark.

(Subhash Narayan can be contacted at subhash.n@ians.in)

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