The Steel Authority of India-led consortium, which recently won three iron ore mining blocks in Afghanistan, wants the Indian government to compensate the group for the financial losses they suffer in case the deal breaks up at any point of time during the investment period.
This is in addition to the sovereign guarantee that the group of seven domestic steel companies has sought from the government for its borrowings. The companies will invest $11 billion in Afghanistan for developing mines, a steel plant and other infrastructure projects in eight to ten years.
The consortium has already sent a proposal in this regard to the steel ministry which is likely to take it up with finance ministry soon, an official source told FE.
The demand for such compensation has been made for the first time by any steel company buying assets abroad. The SAIL officials said it is because the high risks involved in investing in Afghanistan. ?There has to be an assurance on investment. Since, the government (Indian) is also too keen on this investment, it would be of great help to have such assurance from them,? a company official said on the condition of anonymity.
SAIL chairman CS Verma confirmed the development. He, however, refused to give details. The consortium has both public sector companies (PSUs) led by SAIL, NMDC and RINL (Rashtriya Ispat Nigam), and private sector players JSW Steel, JSW Ispat, and Monnet Ispat and Energy.
Under the proposed plan, the group will set up a 6 million tonne (mt) per annum steel plant in two phases with an investment of $7-7.5 billion, a 1,000-mw (mega watt) power plant and a road-rail link of about 200 km from the mines to the plant site.
The consortium has informed steel ministry that it has already incurred an expenditure of $205 million on bid fee and consultancy. ?We do not know whether the government would look at full compensation or half. We need to discuss every detail with the finance ministry,? a steel ministry official said.
The consortium’s investment is significant even for the government’s strategic partnership with Afghanistan. The governments of both nations earlier this year signed a strategic partnership agreement under which the nations have committed to cooperate in sectors like mining, health care, trade and education. The countries have also signed a memorandum of understanding (MoU) for hydrocarbon sector.
