CAG Flags Major Lapses in Inventory Management at SAIL: ₹4,000+ Crore in Potential Losses
Overview of the CAG Audit on SAIL
The Comptroller and Auditor General (CAG) of India tabled a performance audit report in Parliament highlighting significant lapses in inventory management at the Steel Authority of India Limited (SAIL) between FY 2016-17 and 2022-23. The audit reveals systemic inefficiencies, excess procurement, misuse of resources, and potential losses running into thousands of crores.
No Benchmark for Inventory Carrying Cost
Despite holding average inventory worth ₹21,698 crore—nearly 67% of its current assets—SAIL failed to fix benchmarks for inventory carrying costs across raw materials, semi-finished, and finished goods. This omission hindered financial efficiency across plants.
Production Disruptions Due to Raw Material Shortages
The Rourkela, Bokaro, and Durgapur steel plants faced shutdowns of their Blast Furnaces due to inadequate stock levels of essential raw materials like iron ore, coke, and sinter. The disruption led to a production shortfall of 9.32 lakh tonnes of hot metal, translating into a potential revenue loss of ₹1,231.52 crore.
CAG noted that non-moving inventory remained persistently high—ranging from 6.10% to 8.38%—well above the acceptable norm of 3%. From FY 2016-17 to 2022-23, non-moving inventory of spares alone rose from ₹137.40 crore to ₹212.57 crore (a 55% increase), indicating blocked capital and poor inventory turnover.
Excess Procurement and Delay in Order Placement
In 9.71% of procurement cases, SAIL took longer than the stipulated 186 days to place purchase orders, contributing to excessive procurement without corresponding demand. Additionally, SAIL purchased 0.17 million tonnes of costlier coal from Bharat Coking Coal Limited in FY 2020-21, despite cheaper alternatives, leading to an avoidable expense of ₹4.65 crore.
Excessive Use of Imported Coal
SAIL consumed imported coal beyond its prescribed norms, resulting in a potential additional cost of ₹2,539.68 crore over seven years. Plants like Bhilai and Rourkela also overused limestone, dolomite, and iron ore fines in sinter plants by ₹349.39 crore, while special steel plants consumed costly fuels beyond budget worth ₹66.46 crore.
Delay in Infrastructure Upgrade
At Bokaro Steel Plant, delays in replacing the conventional Ladle Car with a Torpedo Ladle Car led to increased transit losses of molten iron—between 3.03% and 4.54%—resulting in missed savings worth ₹400.76 crore.
Shortfalls in Production and Dispatch
Against a target of 119.66 million tonnes of saleable steel, SAIL managed only 106.15 million tonnes (89%) during the review period. Dispatches accounted for only 77% of customer orders, reflecting inefficiencies in order fulfillment and inventory liquidation.
Export and Production Misalignment
SAIL over-exported semis over finished steel, despite the latter yielding higher contributions. The excess export (0.50 million tonnes) led to a potential loss of ₹176.99 crore. Similarly, overproduction of Pig Iron led to revenue losses of ₹1,022.15 crore due to limited conversion of hot metal into saleable steel.
Unlinked Production at Special Plants
Production without demand at Alloy Steels Plant, Visvesvaraya Iron and Steel Plant, and Salem Steel Plant resulted in excess inventory of ₹119.26 crore, lying idle for over five years.
Undisposed Sub-Grade Iron Ore
Out of 43.17 million tonnes of sub-grade iron ore fines available at mine heads, SAIL could dispose of only 1.62 million tonnes due to lack of approval from the Jharkhand government, leaving inventory worth ₹3,995.75 crore undisposed.
Unutilised Tailing Fines and Slag Inventory
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Dalli and Barsua mines held 102.72 lakh tonnes of tailing fines worth ₹492 crore.
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Rourkela and Bhilai Steel Plants had unprocessed slag and iron scrap valued at ₹460+ crore.
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Lack of a time-bound disposal plan led to rising accumulated stock.
Faulty Pricing in Slag Sales
Bokaro Steel Plant sold slag below market prices, leading to a revenue shortfall of ₹441.40 crore. The pricing was not aligned with prevailing market rates (₹500–₹1,220/tonne vs. contract rate of ₹336–₹444/tonne).
Incomplete IT Integration
Despite implementing SAP-ERP across five integrated plants, the system wasn’t standardised across all units. Plants operated in silos, resulting in:
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Absence of real-time inventory data,
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Lack of centralised vendor databases,
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Manual intervention in automated systems.
Gaps in Stock Verification
In violation of policy, 46 out of 49 stockyards skipped half-yearly stock verification during some or all years between FY 2016-17 and 2022-23. In 10 yards, no stock verification was done at all.
Conclusion: Time for Strategic Reforms
The CAG's audit exposes critical gaps in inventory and resource management at SAIL, with potential and actual losses exceeding ₹4,000 crore. The findings call for:
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Robust digital transformation across all units,
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Transparent procurement planning,
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Faster order fulfillment,
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Streamlined disposal of legacy stock and scrap.
These systemic corrections are essential not just for financial efficiency but also for restoring public trust in India’s largest state-owned steelmaker.
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