After Severstal's Cold Shoulder, NMDC Must Prep India Steel Mill

kremlin soldier and cannons
Russian steel producers not so interested in India’s projects.

It’s billed as India’s first “ultra mega” steel plant (though one wonders why the words “ultra” and “mega” are both used, since they, you know, mean the same thing), but after Severstal left the scene, the project has already started off with some teething problems.

India’s iron ore producer National Mineral Development Corporation (NMDC) has now been given the “onerous” task of creating the basic infrastructure for the setting up of the 3-million-ton-per-year capacity mega plant. According to a report in the Economic Times, the National Manufacturing Competitiveness Council, led by Indian Prime Minister Manmohan Singh, has entrusted NMDC with the task.

Quoting unnamed sources, the news report said NMDC would do all the preliminary work, such as procuring the land, getting clearances like environment and forest approvals and ensuring the supply of raw material. NMDC, though, will not have any stake in the project. Its role will be restricted to creating the infrastructure and offering it to steel producers on a competitive basis.

Severstal, You Never Write, You Never Call…

For now, the NMDC will have to go it alone. Way back in 2010-11, the company signed a series of agreements to form a joint venture with Russian steelmaker Severstal to set up the steel plant in the southern Indian state of Karnataka. Some land was even acquired for this, but those were the heady, fairytale days of India’s steel growth story. Since then, though, the project had not moved further until now.

Reuters recently stated in a report that there had not been much of a response from Severstal, while quoting NMDC Chairman C.S. Verma, though he did not specify the reasons why. The same report quoted a Severstal spokeswoman, Anastasia Mishanina, as saying the company had “decided to suspend its project in India due to complicated business conditions.”

Now, the fresh move to breathe life into the project seems to be part of the grand plan to achieve 300 million tons of capacity by 2025, a target recently set by the Prime Minister-led panel.

Last Resorts?

The iron ore miner could link up with the Industrial Development Corporations of other states for forming Special Purpose Vehicles (SPVs) that would create the infrastructure for such ultra mega steel plants. This would help the SPV to secure land and create other necessary infrastructure without facing many hurdles. Once the clearances and linkages are in place, the shell companies would be offered to project developers in a transparent way for putting up steel plants.

Just last month, global steelmaker ArcelorMittal and South Korea’s POSCO had abandoned their steel projects in India due to certain delays in acquiring land and mining rights.

Related Analysis: Why ArcelorMittal, POSCO Better Off Leaving India 

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