Chhattisgarh plans to sign letters of intent with two more steel producers, bringing the total number of steel agreements to 48. This is even as it continues negotiating with the government-owned National Mineral Development Corporation (NMDC) to ensure an adequate supply of iron ore for the investors.
Bhushan Steel & Strips Ltd and Monnet Ispat & Energy Ltd are expected to sign deals with the state this month, according to government officials. Bhushan Steel plans to set up a 1,000MW power plant and a two-million-tonne steel plant investing between Rs6,000 crore and Rs7,000 crore. It is also negotiating with NMDC, which controls the bulk of the ore in the state.
The officials did not release details of Monnet’s plans. The company’s managing director Sandeep Jajodia was not available for comment.
According to an official, who did not want to be named, there are no mines available to give to steel investors. “There are only a few untapped pockets which the Chhattisgarh State Mining Corporation will develop,” he said.
Steel companies have expressed reservations about making investments without the assurance of captive iron ore mines. Another source of worry is the export of iron ore.
Neeraj Singhal, managing director of Bhushan Steel, said instead of exporting iron ore, the focus should be on adding value within the country. “At present, we are exporting iron ore for $30 (Rs1,290) per tonne but with value addition, we may be able to get $600 per tonne,” he said.
Security is yet another issue. Investors in Chhattisgarh’s steel sector include Tata Steel, with a Rs10,000 crore investment in Jagdalpur district for a five-million-tonne plant, and Essar Steel, with Rs6,000 crore invested in a 3.2-million-tonne plant in the Naxalite-affected Dantewada district.
While a Tata official said discussion with the state for acquiring 5,000 acres of land is going on, Essar Steel continues to face disputes over its land requirements; two members of a prominent family in Bhansi village, the proposed plant site, were killed by rebels opposing the land sale last week.
The state has 83 sponge iron ore plants and 130 rolling mills. Sponge iron units make intermediary products that go into steel making, while rolling mills produce finished steel such as hot rolled coils.
And that is where the iron ore availability problem arises. To support smaller industry, NMDC has committed to giving two million tonnes of iron ore to sponge iron plants. “We will not be able to give existing iron ore mines to integrated steel plants as it will bring down the allocation to small producers and make them unviable,” the state official said.