The latest directors' report points out that cumulative expenditure incurred from the zero date of the project to March 31, 1998, was Rs 54.15 crore including Rs 13.58 crore spent in 1997-98. In view of the slowdown in project implementation, commissioning will be rescheduled after achieving financial closure. According to the revised plans, the plant was expected to begin production by March, 1999.

Moreover, the company has created security in favour of the Industrial Finance Corporation of India by mortgaging land acquired for the project. The validity of the current mining lease (6 sq km) has been extended and two more prospecting licences for a total of 3.32 sq km have been sanctioned.Contracts for major plant and machinery and vital auxiliary equipment have been finalised. Imported plant and machinery for raw mill and coal mill have been shipped and are expected to arrive soon.

During 1997-98, GKW's operations and profitability were affected by reduced demand for all products and high costs of borrowings. Interest costs increased to Rs 25.60 crore. It excludes Rs 8.77 crore of interest capitalised for projects under implementation. The company reported a net loss of Rs 25.36 crore compared with a profit of Rs 4.80 crore in 1996-97.

The Bhandup unit of Sankey electrical stampings division is under lockout since February 5, 1998, and the auditors noted that "the vouchers and related documents for the year" were not available for verification.

Powmex Steels division continues to underperform mainly due to lower volumes for high-speed steel in the domestic market. Its capacity utilisation is around 50 per cent. High level of borrowings neutralised the operating margins of thedivision.

As part of the reconciliation of Powmex Steels's dues to the financial institutions and banks, GKW has drawn Rs 2.64 crore from general reserves on account of pre-merger dues and Rs 11.63 lakh on account of post-merger dues and charged it off to the profit and loss account for 1997-98.

The confirmation of a financial institution in respect of these adjustments is pending and GKW may issue equity shares at a later date to settle part of these dues. As on March 31, 1998, the company's total borrowings stood at Rs 206.55 crore against Rs 155.74 crore in the previous year.