NMDC will go alone for steel plant project

Kolkata: The memorandum of understanding (MoU) between Steel Authority of India Ltd (SAIL), Rashtriya Ispat Nigam Ltd (RINL) and National Mineral Development Corporation Ltd (NMDC) for a proposed 4-million tonne (MT) steel plant in Chhattisgarh has been scrapped. The public sector mineral giant would now go alone in the venture.

NMDC sources said that it was decided by the steel ministry that the company would build the plant. An action plan for the project would be submitted to the ministry this month.

A SAIL spokesperson, however, declined to comment on the sudden development.

The MoU was signed on August 17, 2007. According to the arrangement, the three companies were supposed to have equal participation on the contruction of the steel plant, which would be set up at a suitable site on the basis of a pre-feasibility study to be prepared by a consultant.

SAIL had taken the lead for having the pre-feasibility study and feasibility reports prepared and Mecon was nominated for the purpose. NMDC was supposed to take the lead for obtaining land, mining leases, statutory clearances.

NMDC sources said the ministry’s decision could be based on the fact that with the company’s knowledge of Chhattisgarh, it would be best that they go alone in the venture.

Sources pointed out that SAIL already had major expansion programmes lined up. The steel major had set a target of doubling capacity by 2010-11.

NMDC currently produces 30 MT of iron ore from mechanised mines at Bailadila in Chhattisgarh and Donimalai in Karnataka. The investment in the steel plant is likely to be in the region of Rs 12,000-15,000 crore. NMDC has cash reserves of around Rs 7,000 crore.

The mining PSU is likely to close the year with a profit before tax of Rs 3,700 crore.

By October 2009, NMDC would add another seven million tonnes to its production from the 11B block of Bailadila.

The company has also got allocation of Kumaraswamy blocks B and C in Karnataka, which has reserves of around 120 MT.

Industry sources pointed out that in the next fiscal NMDC’s profits would swell further with iron ore prices increasing at a fast pace. NMDC was expected to increase prices by 65 per cent for the new contracts.