Chhattisgarh rail link to move iron ore, steel

Chhattisgarh rail link to move iron ore, steel

After more than a decade of discussion, a rail link in Chhattisgarh to ease the movement of iron ore and finished steel for the Steel Authority of India Ltd (SAIL) and iron ore producer National Mineral Development Corp. (NMDC) is finally chugging forward.

Both the public sector companies are expected to sign a cost-sharing agreement with the Chhattisgarh government and the Indian Railways next month to fund the 235km Dalli-Rajhara-Jagdalpur rail line. The project, first proposed in 1995, is estimated at more than Rs1,000 crore.

The railways will execute the project and the state government will acquire necessary land to build the rail line, said steel secretary R.S. Pandey.

The project is a good sign for steel companies who have been demanding better infrastructure, apart from iron ore mines and land, to allow them to more easily invest in the capital-intensive industry. Several ministries are expected to examine such problems for investors at the end of the month.

The planned rail line, part of the South East Central Railway, gives SAIL access to the ore mines in Rowghat, with a reserve of 500 million tonnes (mt), located 80km from its plant in Bhilai. “Iron ore from Rowghat is critical for the Bhilai steel plant," said S.K. Roongta, SAIL’s managing director. The company has not yet secured a mining grant.

The Bhilai plant makes 3.2mt of steel, including rails and heavy structurals. The company’s existing mines at Dalli-Rajhara have reached an exhaustion point and will close down within four years. SAIL is seeking fresh allocations to fuel its expansion plans as the country’s demand for steel continues to grow.

NMDC, which now largely depends on the Kottavalasa-Kirandul line, connecting its operating mines in Bailadila in the southern part of the state to Visakhapatnam in Andhra Pradesh, will also gain market access in central India.

SAIL, NMDC and Rashtriya Ispat Nigam Ltd signed a joint venture to set up a 4mt steel plant in Bailadila earlier this year.

SAIL also has set a target to produce 10mt of steel by 2020 in Bhilai. It will invest Rs2,500 crore to set up a pellet plant and develop the Rowghat mine.

Under a 2004 calculation, the rail project was estimated to cost Rs968 crore, but will escalate, according to a SAIL official closely involved in the development. SAIL will spend Rs450 crore to fund the first phase—a distance of 95km from Dalli-Rajhara to Rowghat.

The second phase, about 140km from Rowghat to Jagdalpur, will be developed by the other partners. The railways will contribute Rs376 crore, and the state government Rs76 crore. NMDC, the country’s largest iron producer, will make an investment of Rs71 crore. The ministry of environment and forests has already given clearance to divert 259ha of forest land to build railway infrastructure and staff quarters, which it earlier opposed.

NMDC, which currently depends on a single rail line between Bailadila and Visakhapatnam, will have the option of an alternative route to transport iron ore, said an executive at the company, who did not want to be named due to company policy.