Steel cos play safe to hedge project risks
Mittal Steel’s MoU with Orissa to set up a $9-billion steel project brings to the fore a strategy followed by steel companies where big projects are announced in two or more states to hedge risk.
By TNN |
MUMBAI: Mittal Steel’s MoU with Orissa to set up a $9-billion steel project brings to the fore a strategy followed by steel companies where big projects are announced in two or more states to hedge risk.
A few of the big names in the Indian steel industry including Tata Steel, JSW Steel and Essar Steel have announced multi-billion dollar projects in multiple states. Analysts say the projects are more for tying up raw materials and making sure that at least one project takes off.
Earlier in the year, LN Mittal had expressed his “unhappiness” over the progress of the steel project in Jharkhand and later disclosed his intention to set up a steel plant in Orissa. Though Jharkhand chief minister had since made frequent visits to London to “impress upon” Mr Mittal, little materialised on the ground.
The main glitch was the grant of iron ore mines, mainly in mineral-rich Chiria. Orissa, on the other hand, “hopes the company would commence work soon and complete it (project) on schedule”.
Little wonder that Jharkhand chief minister Madhu Koda has been crying foul claiming in a news report that “Mittal was never serious” but only “interested in taking away iron ore reserves”. Mittal Steel representatives, though, assured that the Jharkhand plan “stands”.
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“It doesn’t take an expert to see that few of the projects announced in Jharkhand, Orissa and Chhattisgarh have made significant progress,” says a senior official at a leading mining firm. “While state governments could be blamed for inaction, one should also check how many of the companies are serious about setting up the plants,” he added. A senior official at JSW Steel, while admitting the company may not be able to simultaneously take up the three projects it wants to set up in Orissa, West Bengal and Jharkhand, pointed at the lack of clarity in government policy.
“We need a policy for land allocation that also covers resettlement and rehabilitation,” he said.
"Most of the projects have been delayed because of this. Similarly, the policy on captive mines and mining is also unclear.” The mining lobby has been crying hoarse that the MoUs signed (42 in Orissa alone) are an “eyewash” to corner iron ore and coal mines.
“We fail to see how at the present rate, total steel production capacity in the country can increase to 110 million tonne by 2011 as claimed by a few companies,” said a mining official. The steel industry has been banking on the argument to call for a ban on the exports of iron ore.
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