Tata Steel, the country's largest private sector steel maker, will make an investment of Rs 1,995 crore (Rs 19.95 billion) to increase production capacity of crude steel by one million tonne to five million tonnes per annum.

The proposed expansion plan, taking the finished steel production capacity of the company to around 4.5 million tonnes from the current level of around 3.7 million tonnes, would be executed over a period of 2-3 years.

RC Nandrajog, vice-president (finance) at Tata Steel, said the proposed expansion would be largely financed through internal accruals. "The process includes setting up a blast furnace at an investment of Rs 500 crore (Rs 5 billion) that would be through internal sources."

He further added, "We are yet to take a final call on the mode of financing the balance expansion. We are currently exploring various schemes of financing."

"We are among the least cost steel producers globally and our investment cost in installing the balancing capacity is far less compared with setting up a greenfield project," Nandrajog said.

The company on Wednesday informed the Bombay Stock Exchange that its board has already approved the scheme of expansion in principle and the formal approval would be obtained in due course.

Senior officials at Tata steel also said that the expansion plan was also in line with the increase in domestic as well as international demand. Price realisations have also been at healthy levels. However, the company intends to export only 15 per cent of its production.

The additional capacity to a large extent would be divided evenly between longs, flats, cold rolled steel. Post-expansion, the blast furnace's capacity to convert iron ore into hot metals would increase from 1 million tonne to around 1.8 million tonnes.