SAIL junks steel unit for wind energy plant

Written by parul | Parul Chhaparia | Subhash Narayan | New Delhi | Updated: Aug 29 2011, 09:39am hrs
Public sector steel major SAIL has dropped its plan to set up a stainless steel special economic zone (SEZ) at Salem in Tamil Nadu. Instead, the company has decided to set up a wind energy plant to meet its renewable energy requirement.

The government-owned steel major has already invited the expression of interests (EoIs) from private energy firms to develop the wind energy unit, according to sources privy to the development.

The plan to drop the SEZ initiative has ben taken due to unviability of such a project in the changed economic environment. The companys partners for SEZ had earlier walked out from the project citing similar reasons.

According to industry sources companies like IL&FS, Green Infra and Moser Baer are among the renewable energy firms that have shown their interests in the project. We are in the process of studying these bids. A decision will be taken only after that, a SAIL official aware of the development told FE.

The decision to go for an energy plant comes after almost four years of planing and re-planning by the steelmaker which had been wanting to setup a SEZ at Salem in an area spread over 250 acres near its existing stainless steel facility. The SEZ project was then considered attractive as company had huge tract of surplus land at the plant with good infrastructure to support exports.

The company official maintained that in the present market scenario where the demand for steel is flat, it would not be viable to set up a single-product SEZ.

The change in the plan would help the company to meet its renewable energy requirement. Under the national action plan on climate change (NAPCC), the government makes it mandatory for power consumers to increase their renewable purchase obligation by 1% every year to the base-line of 5% fixed in 2009-10 till 2020.

The SAIL official said, this was the main reason why the company decided to shift to a wind energy plant. Moreover, the location is suitable for a wind farm due to high intensity and consistency of wind, a prime requirement for setting up wind projects.

SAIL produces about 700 mega watt (mw) energy every year through its captive units.

Of this, about 35 mw are sourced from renewable. The company plans to produce 80 mw renewable energy by 2015-16.

The Salems SEZ plan has not been going SAILs way soon after it was announced. In 2007, SAIL had signed a memorandum of understanding (MoU) with IL&FS Infrastructure Development Corporation (IIDC) to form a special purpose vehicle (SPV) to develop, operate and maintain a SEZ dedicated to the steel sector. However, IIDC walked out of it citing the then economic crisis. Later, the steel company revived its plans and invited fresh EOIs for the joint venture project, which also seemed to have not worked out.

The wind energy plant would be significant for SAIL as it is in the process of R72,000-crore modernisation, which is expected to get completed in couple of years. With the expansion, SAILs energy requirement would go up tremendously.

With our energy consumption going up, we also need to enhance our renewable energy production accordingly. Therefor, having a wind energy plant makes more sense, the official said.