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Orissa flooded with iron
and steel plant proposals

By Himanshu

  Orissa – the coastal state of India – seems to be passing through iron and steel age. The state, with 3.3 billion tonnes reserves of iron ore, is witnessing a mad rush for the mineral by a number of domestic as well as international companies. If all proposed plants are taking off, the state will be proved as India’s Ruhr valley in the making. The state has already signed memoranda of understanding (MoUs) with seven companies, which will put up at least 10 mt of steel capacities. These companies will be allotted iron ore mines to meet their requirements. The companies which have already signed the understanding include Arthi Steel, Neepaz Metals, Scaw Metalics, Deo Mining, Visa Industries, SMC and Shyam DRI. At least half-a-mt of steel manufacturing capacity is expected to be completed by the end of the current fiscal. The total investment by these companies will be at least Rs 2,500 crore in the first phase.

Geographical advantages
Orissa is endowed with huge natural resources with iron ore leads the attraction currently. The fore and foremost advantage the state possesses is the easy logistical support. The coastal state has proved beneficial for the existing companies and will be more cost saving proposition for exports of finished goods to all possible locations for steel producers. Hence, The state has become an attractive destination for steel makers as they are looking for iron reserves to feed their plants outside the state. Sensing more possible attractions in future, Orissa formulated a policy under which mineral resources can be exploited only if the value addition is carried out within the state. Hence, miners will have no options but to set up plants for value additions if they want to exploit iron ore from the state. The major mining belts that the manufacturers are eyeing include Gandhamardhan and Malontali Barbil.

Eight deals through, 15 are in pipeline
The state has been succeeded in signing MoUs with eight steel manufacturing companies and there are 15 proposals in pipeline for which Orissa has been seriously considering to inking the deal. Surprisingly, approximately 15 more proposals are on card apart from the aforementioned proposals. These companies have shown keen interests in setting up steel plants in the state. The state is now close to signing MoUs with Maharashtra Seamless, SPS Sponge Iron, Sunflag Industries, Orissa Sponge Iron and Jindal Stainless Ltd for setting up steel plants in the state. The total investment by these companies in the first phase will be around Rs 5,000 crore. According to the government’s latest policy any company that intends to carry out iron ore mining in the state will have to buy land for setting up a steel plant, achieve financial closure for the project and invest 25 per cent of the project cost. The leases will be finally allotted only after 50 per cent of the project cost is incurred. Meanwhile, all the big names from the iron and steel industry have queued up with proposals to set up huge steel projects in the state if iron ore mines are allotted to them. Essar Steel has submitted a proposal for a 4-million tonne steel plant and a 6-million tonne pellet plant, while the Tatas have announced a 6-mt greenfield steel project at Dubri. Other players who have submitted plans to the government include Uttam Steel, POSCO and BHP Billiton. Jindal Iron and Steel and Ispat Industries have also applied for iron ore mines in the state.

Govt. to pocket huge income
If all steel plants under various stages of implementation come through in next couple of years, the state government will earn at least Rs 7,000 crore as tax revenue. By the end of 2006-07, at least seven mini-steel plants will go for trial production. According to a study done by independent agency, the state had 205 projects worth Rs.112,261 crore in various stages of planning and implementation as of June 30 last year. The companies would only have captive mines only after they spent at least 50 per cent of the project cost. The companies will only be eligible for the mines after they spend 25 per cent of the project cost and the mining lease will be given after they spent 50 per cent of the total project cost. The state’s revenue from mines at Rs 550 crore has gone up by 25 per cent at the end of March end. For the current fiscal, the state has set a target of Rs 618.7 crore.

To see another sponge iron plant
SPS Sponge Iron Ltd., a SPS group company, will set up a sponge iron unit in Orissa. The state, one of the most emerging coastal hubs in India, will see a sponge iron and steel making facility soon. The plant will be set up at Jharsuguda by SPS Sponge Iron Ltd., a SPS group company, all set to go for renaming as SPS Steel & Power Ltd. at an investment of Rs.3.80 billion. An application for name changing has already been made to the Registrar of Companies. Sources from the company said that the Rs.3.66 billion group, another group company SPS Steel Rolling Mills Ltd, which manufactures the Elegant brand of TMT (thermo mechanically treated) bars at its Durgapur plant, would be merged with SPS Steel & Power in due course. The first phase of the Jharsuguda plant would be operational by September this year and commence manufacture of sponge iron. The second phase is scheduled to be commissioned by June 2005. When complete the plant would produce 2,88,000 tonnes of billets, two lakh tonnes of sponge iron, one lakh tonnes of finished steel, two lakh tonnes of pig iron and 20 MW of DRI-gassed power annually. Production from the plant in Jharsuguda would be used a raw material for the SPS Steel Rolling Mills Durgapur plant, where the capacity is being augmented to 2,20,000 tonnes per annum, from 1,20,000 tonnes per annum currently, at an estimated investment of Rs.450 million. Besides TMT bars, which are manufactured under licence from Thermax of Germany, the Durgapur facility will embark on the manufacture of angles, channels and fiats. The second rolling mill at Durgapur would be operational by October this year.

Vedanta plans iron ore mining
Vedanta Resources is now planning to flag off iron ore mining and steel production in India after a successful venture into non-ferrous metals that helped it become the London Stock Exchange’s biggest listing in ’03. Vedanta officials said preliminary discussions had taken place with the Orissa government for potential development of an iron ore mine and a steel plant. An Orissa state government official said the proposed steel plant will have a capacity of 5 mt at a cost of Rs 12,000 crore. The plant is proposed to be developed in two phases, to manufacture both flat and long products. The project, if implemented, will be developed over a period of five years. If plans succeed, Vedanta will manage all upstream projects, that is, iron ore, while any steel production will be under the control of Volcan Investments. The latter is Vedanta’s major shareholder with a 53.8 per cent stake. While, Vedanta may go it alone on the mining project, Volcan is likely to rope in a partner for the steel venture. Vedanta said negotiations regarding iron ore are at an early stage, but represent an opportunity for the company to diversify its portfolio of base metals. Vedanta’s CEO Anil Agarwal will visit Orissa soon to discuss his proposal with state government officials. Vedanta has already begun construction on a 1.4m tonne alumina refinery in Orissa at an estimate cost of about Rs 3,700 crore.

Posco, BHP Billiton plans a plant
South African steel maker Posco and Australia’s mining major BHP Billiton have jointly approached the Orissa government with a proposal to set up a 10 mt integrated steel plant in the state. Apart from this the two foreign giants have submitted proposals for iron ore mining and setting up of a coke plant. The projects envisage an investment of about Rs 39,000 crore. A high-level delegation from the two companies held long discussions with the Chief Minister, Naveen Patnaik, recently for the same purpose. The delegation organised a presentation showing highlights of the projects and the support they required from the State government. If the proposals are approved in time, the memorandum of the understanding for the steel project would be signed between the state government and the two companies by year-end. The proposed steel plant will possibly be set up either at Duburi in Jajpur district or at Dhamra in Bhadak district, according to Priyabrata Panaik of IPICOL, which plays a key role in facilitating investments in the State. The proposed steel plant, to be developed fully in nine years, would have a production capacity of three mt initially. It would have a production capacity of 10 mt per annum by the end of the ninth year, and would help create employment for about 42,000 people. Apart from the steel plant, the two companies have jointly submitted proposals to supply coke for the steel plants in the State. They have also evinced interest in developing the Dhamra port. In a separate plan, BHP Billiton is making efforts to set up an alumina plant at Kalrapat in the backward Kalahandi district. In this project, the Australian company will have a partner from Orissa, Sulakshini Mines and Minerals.

Orissa is the most prospective state in India due to having huge iron ore resources and government’s intention to develop state with attracting maximum possible business proposals. The government is all set to facilitate the investors with all possible means including with favourable policy planning. Hence, the state which was neglected at a time for foreign direct investment is a preferred choice today. In future too, the state will be considered as a destination for foreign and domestic investors.

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