Tata, NMDC steel plant hits a dead end
Shubhashish / Mumbai May 27, 2012, 00:14 IST
Tata Steel and NMDC, in 2010, signed a memorandum of understanding (MoU) to examine setting up of joint alliances in mines and steel plants. However, two years later, and after several round of talks to set up a steel plant, the two have decided otherwise.
Koushik Chatterjee, chief financial officer, Tata Steel, confirmed to Business Standard, the two companies would not be building a steel plant together in Chhattisgarh. He did not give the reasons for the same but when asked about the progress of the talks, he said, “We are not building any steel plant with NMDC.” NMDC could not be reached for a comment.
The MoU was signed between the then chairman-cum-managing director of NMDC, Rana Som and managing director of Tata Steel, Hemant Nerurkar. The two had talked about converting into an alliance in a year’s time. They had formed a joint committee to assess NMDC’s two steel plants in Karnataka and Chhattisgarh. At that time, NMDC’s Bellary steel plant was talked for a partnership with Tata Steel. NMDC, later, announced a joint venture with Russia’s Severstal to build it.
Later, the two talked about partnering for NMDC’s 3 million tonne steel plant in Jagdalpur, Chhattisgarh, at a cost of about Rs 16,000 crore. NMDC required 1,775 acre of land to build the facility and had got the environment clearance for the same.
In January 2011, Rana Som said the company would build another 2 million tonne steel plant in Chhattisgarh and was in talks with various companies for a joint venture. Tata Steel, too, was in talks for the same. The plant was estimated to cost about Rs 10,000 crore, and Som was confident of an announcement soon.
However, there had been no word on the plant and Tata Steel confirmed it would not be partnering with NMDC to build one.
Tata Steel wants to concentrate on organic expansion plans in the country, for which it was spending a lot of money. The company, recently, added 2.9 million tonne of steel making capacity at its flagship Jamshedpur plant and was fully committed to its Orissa plant. The first phase of 3 million tonne capacity was expected to come up by 2014. The total capacity of the Orissa plant is 6 million tonne and the company plans to spend Rs 34,500 crore on the same.
The MoU statement had read, “Both NMDC and Tata Steel have agreed to co-operate to explore possibilities of entering into joint ventures for the purpose of acquisition, exploration and development of mines, extraction and processing of minerals, setting up integrated steel plants and any other business which is of mutual interest to both organisations.”
The statement further said, "In the current scenario, where the nation’s steel policy envisages a doubling of steel-making capacity over the next decade, a wonderful opportunity has presented itself for both the companies to work together towards this goal. Tata Steel and NMDC plan to jointly address mining and steel-making opportunities."
If successful, the two could have leveraged on each other’s strong fronts to build a steel plant. NMDC with its iron ore resources and Tata Steel with its steel making prowess could have been a perfect match.
Now, NMDC has tied-up with Severstal for its 5 million tonne Bellary steel plant. Coking coal for the plant would be supplied by the Russian company from its mines in Russia at a discounted price. Also, NMDC had made it clear to the government that it wanted additional allocation of iron ore mines for the steel plants and would use ore from its current mines.