State-run mining major NMDC, which has been named the nodal agency for the project by the Prime Minister-led National Manufacturing Competitiveness Council (NMCC), has started the process of acquiring land for the steel plant in Karnataka and plans to invite bids from companies wanting to set up the UMSP.
While Karnataka plant would be the first to come up, the government intends to facilitate creation of more such capacities in ore-rich regions of the country.
The UMSPs are expected to revive interest in greenfield projects even as steel majors such as Tata Steel, ArcelorMittal, Posco, JSW Steel are grappling with land acquisition problems, raw material security issues and delays in environment and forestry clearances.
In fact, Posco and ArcelorMittal recently announced withdrawal of their proposed steel projects in Karnataka and Orissa, respectively.
We are in the process of acquiring 2,500 acres land in Karnataka for the proposed UMSP. Water source for the proposed project has also been identified. If all goes as per plan, bids would be invited from prospective steel companies in the public and private sector to set up the plant, a senior NMDC official told FE.
Apart from Karnataka, NMDC is also exploring land in Orissa for the steel plant. It has asked the state governments to provide iron-ore linkage for the project. NMDC would be the prime merchant miner for these projects with the responsibility of meeting steel plant's entire iron ore requirement, the official said.
The idea of UMSPs is to increase steel-making capacity in the country and feed the growing demand for primary and secondary steel products from other manufacturing industries. The Prime Minister has set a target of 300 million tonne steel production by 2025 and it is felt that this could be achieved by reviving investor interest in greenfield projects. The current steel production in the country stands at 90 million tonnes.
Though the contours of the bidding framework is still to be worked out, it is likely to take into account upfront payment by companies, royalty on minerals, technology employed and time taken to complete the project.
It is a very good idea that will definitely help accelerate capacity addition in the steel sector. But the government should be careful before announcing UMSPs as it may cause problems on valuation and getting prior regulatory approvals,said a Delhi-based steel analyst.
Fresh or greenfield expansion has become a problem because of issues such as land availability in Jharkhand, Orissa and Chhattisgarh that has delayed several projects where state governments had signed MoUs.
Tata Steel has put on hold its plans to set up a 12-million tonne per annum integrated steel plant in Jharkhand and a 6 million tonne unit in Orissa, too, has been delayed.
The plans of ArcelorMittal to set up massive steel plants in India also looks doubtful as clearances are slow.