MUMBAI, May 14: Stainless steel major Mukand Ltd will set up a 420 MW power project at Korba in Madhya Pradesh with an investment of around Rs 1,200 crore. This is in addition to various small captive power plants that the group is setting up at its various energy intensive plants.

Rajesh V Shah, vice-chairman, Mukand Ltd said ``The process of getting clearances is going on.'' The project consists of two 210 MW power projects each. However, he did not give more details about the proposed power project in Madhya Pradesh.

The Mukand group which has been traditionally engaged in steel and engineering business has decided to diversify into power as the fuel consumption in its steel plants has reached a very high level. Mukand currently manufactures alloy steel and stainless steel of higher quality from electric arc furnace (EAF) route. EAF units are the worst-hit by the power tariff hikes. The company's profit margin has been coming under pressure as it could not pass on the increase in input costs and power tariff to the customers. The company's operating margins have fallen from 12 % in 1993-94 to 10.2 % in 1995-96 and the adjusted profit after tax at Rs 40.9 crore was boosted by income of Rs 29.5 % from real estate business started last year.

Mukand is amongst the largest consumers of power in Maharashtra with a peak level requirement of 80 to 90 MW. Electricity was purchased by the company during 1995-96 at a cost of Rs 65.29 crore (tariff rate of Rs 2.66 per KWH) as against Rs 58.7 crore (tariff rate of Rs 2.57 per KWH). The company had to close down some of the plants to prevent a pile up of inventory and also due to the recession in the steel industry. Hence the company has been diversifying its operations to other states like Orissa, West Bengal, Karnataka and Rajasthan and moving to generate power to fuel its various plants.

Since the project size of MP plant is limited to 210 MW each, the clearance of the project will be with the state government. According to sources, the Mukand power project has obtained clearances from the state government but is pending with the Central Electricity Authority for its final nod. Part of the electricity generated from the two projects will be sold to the Madhya Pradesh State Electricity Board.

The company's 35 MW captive power plant at its Kalwe plant in Maharashtra involving an investment of Rs 100 crore is expected to take care of a major part of the company's power requirements there. The plant will be fuelled by the process of gases generated from steel making operations.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.