New Delhi: State-owned trading firm MMTC Ltd has joined hands with India’s largest power generation equipment manufacturer, Bharat Heavy Electricals Ltd (Bhel), to help itself secure diamond, cobalt and iron ore mines in the Democratic Republic of Congo.
It has done so by riding on Bhel, which is expecting a contract to build a 72MW hydroelectric project in Katande for the Congo government. As a deal sweetener, Bhel has sought that the Congo government—which is also seeking a $250 million (Rs1,192 crore) line of credit from India—award mines to MMTC.
Mint could not immediately ascertain the value of the mines sought by MMTC.
Africa plans: Bhel, which supplies power generation equipment to projects such as NTPC’s Simhadri plant, and MMTC are among the first PSUs to leverage their competencies for overseas contracts.
A line of credit is an agreement by a lender to provide a client with loans up to an approved limit, without a formal application. If the deal materializes, the cost of transaction would be deducted from the line of credit.
“While we will get the EPC (engineering, procurement, and construction) contract, MMTC will get the mines. A delegation from Congo is coming in the third week of August to work out the details,” said a Bhel executive, who did not want to be identified.
An MMTC official confirmed the discussions but spoke on condition of anonymity.
India wants MMTC to be party to such an arrangement as mining concessions are easier to secure in government-to-government negotiations. India is the world’s largest importer of diamond with a yearly value of $10 billion.
India wants to leverage its strong relationships with African nations to land mining concessions. India has discovered in recent years that China’s economic diplomacy had put its interests at a significant disadvantage.
Mint had reported on 16 September about Indian public sector units (PSUs) evolving a joint mechanism by leveraging their competencies to get overseas projects or contracts. Bhel and MMTC are among the first PSUs to adopt this approach.
“Bhel enjoys a very good standing in the African continent. The matter is under active discussion. There is also a possibility of Congo’s foreign minister visiting India early September,” said Vishnu Prakash, spokesman at India’s ministry of external affairs (MEA).
PSUs are eyeing global opportunities in coal mining, power projects, refining, equity stakes in hydrocarbon blocks and infrastructure. MEA will play its part in the Indian energy security programme by promoting enhanced diplomatic relationships with other countries, particularly to resolve sticky issues driven, at times, by geopolitics.
Bhel is looking abroad for contracts as it fears that its domestic market share may decline to 50% from the current 60% in five years due to increasing competition from local and foreign companies.
“There are political uncertainties in countries such as Congo, which may affect this arrangement. It may be difficult for this arrangement to work out,” said Girish Solanki, a Mumbai-based research analyst at Angel Broking Ltd.
Of Bhel’s order book position of Rs1.25 trillion, global orders account for around Rs7,500 crore. West Asia, Africa and Central Asia are the primary international markets for Bhel, which plans to raise exports to Rs10,300 crore by 2012.
Bhel posted a net profit of Rs3,039 crore on revenue of Rs27,505 crore in the fiscal year ended 31 March. It aims to become a $10 billion-plus firm by 2012. MMTC posted a net profit of Rs1,654.42 core on a turnover of Rs36,904.62 crore in 2008-09.