Steel Authority of India

It gives me immense pleasure to welcome you all to the 35th 
 Annual General Meeting of your company. You may please recall that 
 in my maiden address in last year’s AGM, I had stated that with your 
 support, it would be my endeavour to take your company to new heights 
 and provide greater value to the stakeholders. I report with humility 
 and pride that your company has performed well in the year 2006-07 and 
 today it is stronger than ever.
 
 The financial year 2006-07 has been an eventful year for your company 
 as well as for the steel industry. With finished steel output crossing 
 52 million tonnes and consumption touching 46 million tonnes in 2006-07
 India has reached fifth position amongst the world’s steel producing 
 countries behind China, Japan, the US and Russia.
 
 India today is one of the fastest growing economies with a compounded 
 annual growth rate of 8.6% in the last three years. GDP growth for 
 2006-07 has been 9.4%, whereas steel consumption in India during the 
 same period increased by 11.4%. The forecast of growth of above 8.5% 
 for the current year and actual GDP growth of 9.3% for April-June ’07 
 augurs well for SAIL and the steel industry in India.
 
 Record Performance in 2006-07
 
 Your company achieved a new record in production of saleable steel 
 at 12.6 million tonnes during 2006-07 with capacity utilisation 
 touching a new high of 114%. Special thrust was given during the year 
 on production of value added and special steel items and I am glad to 
 report that your company produced 3 million tonnes of these products,
 representing a quarter of its total production during 2006-07 thereby 
 recording a growth of 17% over the previous year.
 
 It is heartening to inform that at Rs. 39,189 crore, your company 
 achieved its highest-ever turnover, registering a growth of 21% over 
 the previous year and more than doubling its turnover of Rs. 19,207
 crore achieved during 2002-03. The company also achieved best ever 
 EBIDTA at Rs. 10,966 crore and profit before tax of Rs. 9,423 crore 
 representing an increase of 49% and 65% respectively over the 
 previous year. 
 
 During 2006-07, your company had the distinction of being the first 
 metal company in the country to attain a market capitalisation of 
 Rs. 50,000 crore in February ’07 which has since gone up to about 
 Rs. 70,000 crore. I am glad to announce the Board’s recommendation 
 for a final dividend of 15% for the year 2006-07 and with an interim 
 dividend of 16% already paid, total dividend for the year would be 
 31% of the paid-up equity as against 20% in the previous year.
 
 The year witnessed further growth in the company’s net worth to 
 Rs. 17,184 crore; an increase of Rs. 4,798 crore over the last year 
 and a substantial jump from a low of Rs. 1,989 crore during 2002-03. 
 This has enabled the company to improve its debt-to-equity ratio to 
 0.24:1 as of 31st March, 2007.
 
 With a view to increase the size and reach of its marketing network 
 and make SAIL products available across the length and breadth of 
 the country, the company added 453 new dealers covering 430 districts, 
 bringing the total to 653 dealers covering 527 districts as on 
 31st March, 2007. Today, your company has its presence in as many 
 as 600 out of 603 districts of the country, through its network of 
 stockyards, C&F agency yards and dealers’ outlets. 
 
 To achieve sustainable growth and to foster a motivational climate, 
 your company took several initiatives for human resource development 
 during the year. As a result, labour productivity increased to an
 all-time high. Besides involving front-line workmen in the planning 
 processes, a system of tracking and rewarding creativity and innovations
 by employees on a daily basis was introduced for the first time, 
 generating great enthusiasm at all levels to think and deliver innovatively. 
 
 
 Key Indices
 
 The company gave special thrust for further improving techno-economic 
 parameters during the year, resulting in record continuous 
 cast production of 8.3 million tonnes (up by 5%), achievement of 
 lowest-ever coke rate, best-ever blast furnace productivity 
 and lowest-ever energy consumption per tonne of crude steel. 
 Specific power consumption also reduced by 4% as compared to 
 the previous year. Cost reduction measures at all levels and 
 productivity improvement through systemic and innovative approaches
 resulted in cost saving of Rs. 400 crore during the year.
 
 
 R&D and New Product Development
 
 R&D efforts were intensified across the organisation and several 
 projects were undertaken in diverse areas like yield improvement,
 cost competitiveness, quality and process improvements. SAIL’s R&D 
 Centre secured 40 patents and 38 copyrights during 2006-07.
 
 The company introduced several new products during the year 
 such as HCR-EQR TMT for earthquake resistant construction, rock 
 bolt TMT for tunnel construction, EN series HR coils for LPG cylinders, 
 MC 12 HR coils for chains, etc. In addition, Bhilai Steel Plant 
 developed high-strength vanadium rails, Durgapur Steel Plant 
 produced S-profile wheels for high-speed locos and Rourkela 
 Steel Plant rolled special plates which were used for the 
 indigenously built rocket PSLV C-7. Your company takes pride 
 in supplying steel for critical usage in projects of national 
 importance, including several products for defence purposes.
 
 
 Current Performance
 
 The tempo of growth has been maintained in the current year 
 as well through further optimisation of the company’s resources. 
 In the first quarter of the current financial year, the company 
 has achieved record turnover with profit after tax at Rs. 1,525 crore,
 being highest ever in any first quarter. The strong financial 
 performance has contributed to enhanced cash generation and further
 reduction in debt-equity ratio to 0.18:1 as on 30th June, 2007. 
 This would provide a strong financial base to support the
 modernisation and expansion programmes being undertaken by your company.
 
 
 Future Outlook
 
 Production of 1,244 million tonnes of crude steel in the 
 world in 2006 registered a growth of 8.9% over 2005. Global steel 
 trade also increased by 13% to 395 million tonnes in 2006. 
 This trend has continued in 2007, with world crude steel production
 for the first seven months of the year reaching 762 million tonnes, 
 registering a growth of 8%. China produced 279 million tonnes 
 in this period, a growth of 18.5% over the corresponding period 
 last year. 
 
 During 2007, global crude steel production is expected to reach
 1,300 million tonnes, of which more than one-third will be 
 contributed by China. With the continued strong demand for steel,
 the international steel scenario remains buoyant. Strong positive 
 growth trends are foreseen in Africa, Asia and South America in 2007.
 However, the soaring prices of key inputs such as coal, coke, 
 iron ore, scrap, ferro-alloys, etc., have been the area of major 
 concern for steel producers.
 
 In 2006, the top 15 steel producers accounted for one-third of 
 global crude steel production as against 26% ten years ago. 
 The process of consolidation in the global steel industry 
 got a major boost with the Arcelor-Mittal merger, thereby 
 forming a global giant accounting for about 10% of world’s 
 production. This trend is likely to continue and we can expect 
 more transnational mergers and acquisitions. China also has 
 planned consolidation whereby more than 50% of its production 
 by the year 2010 shall be coming from the top 10 steel producers 
 in the country. All these developments would throw up new 
 challenges for your company for which several strategic 
 initiatives are being taken.
 
 
 Strategic Initiatives
 
 With its highly skilled and committed workforce, largely 
 captive raw materials, nationwide marketing network and 
 available infrastructure to support further expansions, SAIL 
 is today well poised to play a vital role in the growth phase 
 of the country. To contribute to the growth of the Indian steel 
 sector and maintain its leadership position in the domestic steel 
 market, your company has prepared a road map for enhancing its 
 annual hot metal production from the present level of 14.6 million 
 tonnes to over 26 million tonnes through modernisation and expansion 
 programmes being undertaken in all of its five integrated steel plants. 
 The project completion schedules are also being compressed to the year
 2010, against
 
 
 2011-12 planned earlier.
 
 The implementation of modernisation and expansion schemes would
 help in eliminating technological obsolescence, enriching product-mix
 with share of finished steel increasing to almost 100% and introduction 
 of customer-centric processes, apart from upgrading infrastructural 
 facilities in the plants to support higher volumes. This gigantic 
 task requires meticulous planning and coordination with a large 
 number of agencies, selection of right technology and prudent fund 
 management. Your company has initiated actions in all these areas. 
 A number of capital projects have already been commissioned during 
 the year and several others are under implementation, namely, 
 rebuilding of coke oven batteries, installation of slab caster, 
 coal dust injection in blast furnaces, secondary refining units 
 and schemes related to automation and IT. Along with additional 
 new facilities, existing facilities are also being upgraded to 
 enable higher production of value added steel with overall 
 improvement in productivity.
 
 An IISI study projects the demand for steel in India to reach
 160 to 180 million tonnes by 2020. To maintain its market dominance 
 in the long term, your company is simultaneously working on a 
 blueprint for growth beyond 2010. 
 
 Your company has also taken several initiatives to strengthen
 its raw material supply base. To meet the growing needs of iron ore,
 apart from expanding existing mines at Bolani and Gua, new mines
 are being developed. Forest and environment clearances of the Rowghat 
 iron ore deposit have been recommended by the State Government and 
 are in an advanced stage for approval by the Central Government. 
 As regards coking coal, actions have been taken for development 
 of Sitanala as well as Tasra coal blocks. Besides, your company
 along with other major PSUs is seeking to obtain equity in 
 international coal blocks as a long-term security measure. 
 The production from existing captive coal mines of the company 
 is also being stepped up. To augment availability of ferro-alloys, 
 an MoU has been signed with Manganese Ore India Limited for setting 
 up a joint venture unit at Bhilai. 
 
 With a view to find a long-term market for its solid waste disposal 
 and add value, your company is setting up a joint venture cement 
 plant at Bhilai/Satna with annual production capacity 
 of 2.2 million tonnes. Actions have also been taken to set 
 up joint venture cement plants at Bokaro and Rourkela. In order 
 to meet the increasing demand for power, apart from 500 MW 
 expansion at Bhilai, under implementation as a joint venture 
 with NTPC, an additional power plant of 500 MW at Bokaro 
 is being set up by SAIL’s joint venture company BPSCL. 
 To promote your company’s business further, a memorandum 
 of understanding has been signed with RINL and NMDC for 
 jointly setting up a greenfield plant in Chhattisgarh. 
 Action has been taken for development of a multi-product 
 steel-based Special Economic Zone at Salem. Recently, your 
 company has also signed an MoU with POSCO, Korea for a 
 comprehensive strategic alliance.
 
 
 Responsibility towards Society
 
 With the underlying philosophy and a credo ‘to make a meaningful 
 difference in people’s lives’, SAIL has been in the forefront of 
 fulfilling its obligations to society since its inception. Recently,
 the Hon’ble Prime Minister, Dr. Manmohan Singh, gave a clarion call 
 to corporate India to “be a partner in making ours a more humane and 
 just society”. Your company has earmarked a budget of Rs. 100 crore 
 for the current year towards its Corporate Social Responsibility. 
 
 The large healthcare infrastructure network created by the company 
 by establishing 39 primary health centres, 18 reproductive and 
 child health centres, 19 hospitals including 4 super-speciality 
 hospitals provides specialised healthcare to over 2 million people
 every year. Apart from operating about 150 schools in steel townships 
 providing education to over 80,000 children, direct and indirect 
 assistance is being provided to more than 250 schools in peripheral 
 areas. The girl:boy ratio of 1:1 is an important characteristic of 
 SAIL schools, which have a rare distinction of 95% survival rate. 
 Continuous efforts by the company to provide best educational 
 facilities have taken literacy rate to 80% in SAIL townships, 
 much above the national average.
 
 Your company became the first public sector undertaking to 
 receive the prestigious Business World-FICCI-SEDF Corporate 
 Social Responsibility Award - 2006 which was presented by the 
 then Hon’ble President of India, on 7th May, 2007. 
 
 Your company’s Corporate Environmental Policy emphasises ‘
 conducting our operations in an environmentally responsible 
 manner to comply with applicable regulations and striving to 
 go beyond’. The company recognises its responsibility of environment 
 protection and has fully complied with the norms set for water 
 consumption, air emission from batteries and solid waste utilisation. 
 The company planted around 3 lakh trees during 2006-07 and restored 
 over 150 acres of degraded mining area at Purnapani under the MoU 
 between Delhi University’s Department of Biotechnology and SAIL.
 
 Your company’s plants located at Bhilai, Bokaro and Salem, some 
 departments of Durgpaur Steel Plant, Rourkela Steel Plant and 
 IISCO Steel Plant and iron ore mines at Dalli, Kiriburu, 
 Meghahatuburu and Bolani have been certified for environmental
 management system ISO:14001. Efforts are being made towards 
 implementation of ISO:14001 across all units of the company. 
 Your company is also actively associating itself with the Kyoto 
 Protocol and Asia Pacific Partnership for Clean Climate Development
 Programme under the Clean Development Mechanism. 
 
 
 Recognition
 
 Your company’s excellent performance received due recognition 
 from all quarters during 2006-07. This included Vishwakarma 
 Rashtriya Puraskar for 2005 awarded to 41 of its employees for 
 their extraordinary contribution in bringing about laudable 
 improvements in their areas of work. Ten employees also received 
 the national Shram Awards for 2004. Other major awards received by
 the company include BM Munjal Award for Excellence in Learning and 
 Development in Public Sector category for the year 2006, National 
 Sustainability Award 2006 to Salem Steel Plant by the Indian 
 Institute of Metals, National Safety Awards for the year 2002 
 and 2003 to Raw Materials Division presented by the Hon’ble 
 Vice President of India on 14th February 2007 and Rajiv Gandhi 
 National Quality Award for 2006 to Bhilai Steel Plant by the 
 Bureau of Indian Standards.
 
 
 Acknowledgements
 
 All the above accolades and excellence in performance could 
 not have been possible but for the dedication and unstinted 
 efforts of every member of SAIL collective. I gratefully acknowledge 
 the contribution of our workforce, which is our biggest asset 
 and is at the core of our strategies. I also take this opportunity 
 on behalf of the SAIL collective and my colleagues on the SAIL Board, 
 to acknowledge the support extended by the esteemed shareholders 
 of the company. We look forward to receiving your continued support 
 in future as well. We are also thankful to the Ministry of Steel, 
 Government of India, state governments, other organisations and 
 institutions for reposing confidence in the company. I am sure 
 that with inherent strengths and timely measures to face the 
 future challenges, your company is poised for a sustainable growth
 for all its stakeholders.