Sales grew by a meagre 2.3 per cent to Rs 14,994 crore from Rs 14,624.07 crore in 1997-98. The board of directors took the financial results on record on Friday.

The net loss before tax stood at Rs 1,618.33 crore against a net profit of Rs 148.59 crore in 1997-98. The reserves (excluding revaluation reserve) of the company fell to Rs 2,858.14 crore from Rs 4,427.58 crore in the previous year. The operating profit for 1998-99 stood at Rs 1,503 crore.

According to a statement issued by the company, the loss is due to the depression in steel demand and higher burden of depreciation and interest on the commissioning of major modernisation schemes at Rourkela and Bokaro plant and other capital schemes (Rs 5,362 crore) during the year and merger of loss-making subsidiary Visvesvaraya Iron and Steel Ltd (VISL).

The loss was accentuated dueto a downward stock valuation and product mix variance. SAIL had announced a cumulative loss of Rs 890 crore for April-December 1998.

During 1998-99 the company had to bear higher costs, including escalation in input costs of over Rs 450 crore and capital charges which comprised an increased interest and depreciation burden of Rs 3,122 crore. Depreciation for 1998-99 stood at Rs 1,104.06 crore, an increase of 39 per cent over Rs 794.66 crore in the previous year.

Interest charges at Rs 2,017.44 crore were up by 30 per cent from Rs 1,553.76 crore in the previous year.

SAIL chairman Arvind Pande said: "The results of the company are a culmination of the adverse impact of market factors, high fixed costs due to overmanning and the cost of modernisation of our plans".

"SAIL also continues to bear a heavy burden on account of social responsibilities, a legacy which makes it difficult for the company to be competitive. This only emphasises the need for restructuring of the organisation, which will transformit into one capable of making long-term profits," said Pande.

The higher capital charges were partially offset by a savings of Rs 902 crore which SAIL achieved during the year through a focussed cost reduction drive. The cost saving which translates into a saving of Rs 1,010 per tonne of saleable steel, has been over and above the Rs 732 crore achieved in 1997-98 on this account.

"We have planned an even more challenging cost reduction programme for 1999-2000 and a favourable product mix to take advantage of the market uptrend," said Pande.

Despite continuing conditions of oversupply which led to a sharp drop in prices of both domestic and international markets, the total volume sales grew by 7.6 per cent to 8.7 million tonne. However, net sales realisation declined by over 5 per cent, the statement adds.