Steel Projects Hit A Wall At Every Turn

Steel projects hit a wall at every turn

SURESH NAIR, Economic Times

16th May 2006

MUMBAI: Large steel projects, announced with much fanfare last year, are in danger of being delayed due to procedural hurdles, stiff local opposition and insufficient and arbitrary allocation of iron ore mines. The projects include that of the LN Mittal Group, Essar, JSW Steel and even Posco.

The largest of the projects are yet to place orders for even plant and machinery. Neither Posco, Mittal Steel, JSW Steel and Tata Steel have placed orders for plant and machinery for the large projects that they have announced.

Each of the four companies have announced projects of over 10m tonne per annum. While Posco has planned to set up a 12m tonne project in Orissa, the Tatas, JSW and Mittal Steel have announced similar projects in Jharkhand.

The Tatas are, in fact, the only company to have announced that they would place orders for a 6-m-tonne plant in Orissa by June or July. The Tatas have also acquired land in Orissa. Tata Steel MD B Muthuraman, however, had recently announced that the company has identified the area where they intend to set up the plant. He further said that the Jharkhand project is progressing on schedule.

JSW Steel is also yet to make much progress on the Jharkhand project. An industry source said that it is on account of lack of commitment from the Jharkhand government to provide mines to feed such a large project. Mittal Steel is also faced with the same problem. An official from the company told ET availability of iron ore mines is critical for the project. The company was earlier offered a part of the Chiria mine. However, strong opposition from SAIL to parting with the mine has forced the government to look for other mines. Mittal Steel official said the firm has verbally been asked to carry out prospecting at another site. "This place is so thickly forested, its difficult to even carry out prospecting here," the official said. Interestingly, bureaucrats from states such as Jharkhand and Orissa have similar answers to the problem. "The firms should start work on the project. Only then can we recommend mines for their projects," said an official from Orissa government.

"As per rules, once the firm places orders for 20% of plant and equipment then they can be recommended for mining leases," the official added. "How can we present our lenders with a bankable project if mines are not allotted," said an official from a steel firm. It's a chicken and egg situation, said the official. Officials from some of the steel firms which are setting up a mid size plant in Orissa said the delays are mainly due to indecision by the state.

"We have identified the land and we have proposed to buy it out, but the government is yet to state its position on this," said a senior official from a Mumbai-based steel company. Steel projects are also suffering because of lack of firm rehabilitation and resettlement policies. Rehabilitation packages are inadequate, said a company official and added the companies can only go by government policies. "All we can do train people so that they can earn for better livelihood," he said the official.

The government has to acquire the land, he added. The government has put in place firm policies and guidelines for R&R and environmental issue, the industry official said