Japan’s Mitsui plans steel plant in Gujarat

Mitsui and its Indian partner Ruchi Group have firmed up plans to build a multi-product special economic zone (SEZ) at Tagdi village in Kutch, Gujarat, which will house the $1 billion integrated steel complex, said a state government official familiar with the development, who did not want to be named.

Mitsui and Ruchi have a 50:50 joint venture, Indian Steel Corp. Ltd (ISC), which is engaged in the business of setting up and operating steel service centres in India. ISC also has a steel cold rolling and galvanizing plant in Gandhidham with an annual capacity of 200,000 tonnes, which is being trebled.

ISC will set up the steel and SEZ projects in Gujarat, according to another top government official, who also did not want to be identified. The company has already acquired about 50ha of private land at Kutch and the transfer process for another 950ha of government land is on, this person added. The company has approached the state government for a total of about 1,000ha of land for the project.

The projects will help bring in a substantial amount of foreign direct investment, said the second government official.

A senior ISC official in India declined to comment.

“We need to get consent from our overseas partner before we say anything. We would not like to comment as of now and will speak on the issue as and when both the partners feel the time is appropriate," he said.

Many Japanese firms have shown interest in investing in Gujarat in the recent past, especially with 38% of the potential investment area of the Delhi-Mumbai Industrial Corridor (DMIC), promoted jointly by the Indian and Japanese governments, falling in the state.

DMIC, which runs for 1,483km across six states and has a dedicated freight corridor, covers 11 investment regions and 13 industrial areas. A perception plan survey by consultant Scott Wilson pegs it as a $130 billion infrastructure project.

Gujarat has taken a lead over other states in chalking out a master plan for the first phase of DMIC spread across Ahmedabad and Dholera.

The recent global slump in demand hit the SEZ plans of several companies, including Welspun Corp. Ltd and Essar Steel Ltd. Welspun may move its steel project outside its engineering SEZ at Anjar. Essar has denotified its SEZ project at Hazira.

Apart from demand and supply, the low cost of manufacturing in India makes a strong business case for companies to invest in the country. In developed countries, demand is growing at 2-3% compared with 10% in India, according to Ravindra Deshpande, a Mumbai-based analyst tracking metals and cement at Elara Capital Ltd. Capacities are currently being utilized at 75% in the developed world compared with 85% in the developing world, he said.

Foreign companies are betting on growth as well as the lower cost of production by setting up plants in India, Deshpande said. Unlike India, Japan does not have iron ore mines, he said.

If companies have captive mines and are manufacturing in India, the cost per tonne can come down to $400 per tonne from the $525-600 per tonne that it would cost elsewhere, he added.

India has 30 multi-product SEZs of which 13 are in Gujarat. They cover about 83% of the total land area earmarked for all such SEZs.

Exports from all SEZs in the country stood at Rs2 trillion last fiscal, with those in Gujarat accounting for half. Of the three largest Indian SEZs in terms of exports, two are based in Gujarat.

While Reliance Industries Ltd’s SEZ in Jamnagar clocked exports of more than Rs75,000 crore, exports from Surat SEZ, the main unit of Diamond and Gem Development Corp. Ltd, were close to Rs25,000 crore.

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