Mumbai, June 8: The Mittals-controlled Ispat Metallics has suffered a major cost overrun for the third successive year - this time by another Rs 280 crore. With this, the total project cost stands revised at Rs 2,120 crore against the original cost of Rs 1,074 crore. The company's plant located at Dolvi, Ratnagiri (Maharashtra), which will produce hot metal for group flagship Ispat Industries, has also been delayed by 15 months (July 1999-September 2000) because of lack of funds. A senior Ispat official, when contacted, said that Ispat's hot coil project (phase II) is expected to start commercial production by December 2000.The cost overruns in the Ispat Metallics mainly represents interest cost of Rs 265 crore.
According to a recent appraisal by financial institutions, the project cost, which was originally pegged at Rs 1,074 crore (The total cost overrun from 1997 to 2000 is Rs 1,046 crore) has been revised upwards to Rs 2,120 crore. In between, the project suffered major cost overruns to Rs 1,440 crore in October 1998 to Rs 1,840 crore in July 1999.
When contacted, a senior Ispat official refused to comment on the cost overrun, but said that the project is nearing completion and the blast furnace will start commercial production in October. He added that sinter plant will also be commissioned thereafter.
According to appraisal documents, the promoters were not able to bring their part of contributions on time and as result could not raise additional funding to the tune of Rs 163 crore from FIs. This amount was to be jointly financed by IFCI (Rs 121 crore), UTI (Rs 24 crore) and IIBI (Rs 18 crore).Institutional sources point out that the fund was not made available to the company due to delay in complying with "some of the special pre-disbursement conditions."
The present appraisal made by IDBI states that the mechanical completion of the blast furnace is expected by May 2000 and commercial production is expected by October 2000. The company's blast furnace, it may be noted, has already been commissioned on May 8.
The Rs 163 crore gap, it is learnt, will now be chipped in by IDBI (Rs 89 crore), ICICI (Rs 44 crore), LIC (Rs 26 crore) and GIC (Rs 4 crore).The institutions have also agreed to share the interest during construction which aggregates to Rs 250 crore. The interest gap will be divided among IDBI (Rs 100 crore), ICICI (Rs 41 crore), IFCI (Rs 21 crore), IIBI (Rs 9 crore), UTI (Rs 22 crore), LIC (Rs 24 crore), GIC (Rs 4 crore) and banks (Rs 29 crore). The net additional requirement of Rs 15 crore will be brought in by the promoters in the form of equity.
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