BackJSW puts Vijayanagar plant expansion plans on hold
Chief financial officer Seshagiri Rao says expansion plan on hold on account of shortage of iron ore
Premium(Indranil Bhoumik/Mint)
New Delhi: JSW Steel Ltd has put on hold expansion plans of Karnataka’s Vijayanagar plant, which has a 10 million tonnes (mt) capacity, due to continued iron ore shortages.
The company, headed by Sajjan Jindal, had plans to expand its Vijayanagar capacity by 2 mt, taking the total capacity to 12 mt per year. The ₹ 2,695 crore expansion was proposed to be completed in 2013-14.
“We have put it on hold as far as the expansion of 10 mt to 12 mt is concerned (at Vijayanagar). We want this iron ore situation to improve before we do the expansion," JSW joint managing director and chief financial officer Seshagiri Rao said.
To fund the expansion, the company had planned to take ₹ 1,750 crore debt and meet rest of the investments—about ₹ 945 crore—from its cash reserves.
“We have not really spent big money on it and have not placed the orders. So it is on hold," he said. When asked whether paucity of iron ore—the key steel-making raw material—is the only reason for not going ahead with the expansion, Rao said, “yes".
JSW Steel has been struggling to run the 10 mt Vijayanagar plant at its optimum capacity for more than a year and a half years due to shortages of iron ore.
The Supreme Court had imposed a mining ban in Karnataka. Due to the shortages of iron ore, JSW has been running the plant at 80% or lesser capacity and the current capacity utilization is 75-77%, Rao said, adding that the company will be able to meet its production guidance of 8.5 mt for the current fiscal despite the crisis.
During the first 11 months of the current fiscal, the company has produced about 7.8 mt of steel. The iron and steel industry in Karnataka has a production capacity of about 18 mt per year. For this, the annual iron ore requirement has been pegged at about 30 mt.
Against the total iron ore requirement of 30 mt per year, only 15 mt is visible, Rao said. “Fifteen million tonnes per annum iron ore is visible today, then there are some dumps, another 5-6 mt. For that also, the (apex) court has to give clearance. If that comes in, then we will have at least some breathing space. Otherwise, next year will be difficult," Rao said.
He added that JSW is hopeful of apex court providing some more relief to the miners in the state and the company is “eagerly waiting" for the hearing on the issue to complete.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
