Steel MoUs on chopping block
While the controversy over captive mining continues to rage, the rush of MoUs has claimed its first victims with the Orissa government cancelling two MoUs signed with Sunflag Special Steel and Stats Steel Private to set up steel plants.
By TNN |
MUMBAI: Is the Indian steel industry losing its sheen? It surely looks so. While the controversy over captive mining continues to rage, the rush of MoUs has claimed its first victims with the Orissa government cancelling two MoUs signed with Sunflag Special Steel and Stats Steel Private to set up steel plants. The reason: no progress even after one year of signing.
The government had earlier issued notices to seven companies, including Sunflag and Stats Steel, over delay in project implementation. Though the investment and the capacity of the two projects — about 2m tonnes for about Rs 1,900 crore — may be small, they highlight a bigger issue faced by the three mineral-rich states of Orissa, Jharkhand and Chhattisgarh.
“The almost 120 MoUs signed by the state governments over the last two years might soon become an Albatross around their necks. Where is the iron ore or coal reserve to feed these planned capacities? Even land has not been allotted to many of these companies,” says a top official of one of the companies which have been issued such a notice.
Orissa alone had signed 43 MoUs that promised investment of Rs 1,37,156 crore with a combined capacity of almost 60m tonnes by ’20. Overall, the three states have inked MoUs worth Rs 3,57,344 crore for a capacity of almost 150m tonnes.
Compare this to the 38m tonnes produced by India last year, and you know we are talking big numbers.
“Though India remains an attractive destination, the coming years will see more pressure on the companies because of the energy requirements. Most of the companies will face shortage of raw material reserves. Consequently, there will be a hurry to get these MoUs working,” states Vikram Dhawan, assistant vice-president, Reliance Capital.
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LN Mittal, whose company had announced a Rs 40,000-crore project in Jharkhand, made public his doubt as to whether the state had enough iron ore reserves for its 12m-tonne plant. Almost 70% of the state’s 3.5bn tonnes iron ore reserves are in Chiriya mines, which has become the centre of controversy.
Mittal Steel and Tata Steel both have asked for captive mines from Chiriya, which was leased to Indian Iron and Steel Company. Though the Jharkhand government had cancelled the lease, the central mining tribunal has stayed the state’s cancellation order.
Similarly, Mr Mittal is reported to have asked 1bn tonne of iron ore from Orissa for his yet-to-be-announced project in the state. “This could be a tough call for the state that has about anything between 4.5-5bn tonnes of iron ore reserves.
Already about 3.9bn tonnes of reserves are under contract to various companies and the 43 MoUs will require almost 3bn tonnes of iron ore for a normal production life of 30 years. From where is the balance iron ore going to come from?” asked an industry observer.
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