If the JV with POSCO doesnt materialise soon, the Indian steel maker is likely to explore an arrangement with another steel company to set up the special steel facility. It has initiated talks with Japanese steel companies such as Nippon Steel & Sumitomo Metal Corporation and JFE for an alternative arrangement, the sources said.
SAIL and POSCO first signed a memorandum of understanding in 2007 to set up a 3 million tonnes per annum steel plant near SAIL's existing steel making facility at Bokaro. Later, they subsequently inked a follow-up MoU in 2009 further expanding the scope of the joint venture that also envisaged the South Korean steel giant bringing its patented FINEX technology for steel making.
Sources in the steel ministry said that though efforts were on to salvage the JV, the MoU with POSCO may be allowed to lapse next year. They said they could not wait indefinitely to reach common ground.
When contacted, SAIL chairman CS Verma admitted that talks had not progressed for some time. We are talking and are hopeful that the agreement would be signed soon, he said, but added that if things did not move as desired, alternative routes would have to be explored.
Though more than five years have passed since the idea of having a JV was first mooted, the project has failed to take off due to the rigid stand taken by the two sides over equity sharing in the proposed entity. POSCO wants a majority (51%) stake in the JV as it wants control over a venture that would use its patented FINEX technology. The South Korean company is also looking for similar ventures in other markets such as China, and its management has told the steel ministry that the company could come under pressure for similar concessions there too that would be unacceptable. SAIL, on the other hand, wants a 50:50 JV as it feels that the venture is equally supported by both companies and it would allow the PSU to convince its shareholders.
There is no point dragging it on for too long. None of the partners wants to budge from their stands to have a minority stake in the company, said an official on condition of anonymity.
Even though SAIL seems to be fine with a 50:50 equity sharing, Posco is adamant on 51:49, the official said.
The officials said that though both Japanese and South Korean companies are tough to negotiate with, SAIL's experience with Japan's Kobe Steel was without much issues. In comparison, it has been an uphill task to be able to convince the Koreans for equal stake sharing. Let's see if something can be worked out before the expiry of the MoU, said a source.