Steel Authority of India Ltd and Tata Steel are likely to sign an agreement to form a joint venture company for mining four coking coal blocks, most-likely in Jharkhand which have reserves of about 500 million tonnes for meeting their production needs, a senior government official said.
He said both companies would seek to put in place a formal JV company through the pact and then begin scouting for more coal blocks.
The Board would have representatives from both the companies. The new entity is likely to have an initial capital of Rs two crore, to be shared equally.
In view of the growing steel demand, both the firms have embarked on major capacity expansions to ramp up production capacities. While SAIL aims to increase output to 26 million tonnes at a cost of more than Rs 50,000 crore, Tata is also executing major brownfield and greenfield expansion projects.
The move comes amid efforts by many metal companies in India and abroad to ensure raw material supplies. SAIL itself has formed another joint venture with four other public sector firms to acquire overseas coal properties.
Besides, the overseas wing of Coal India Ltd is also reported to be scouting for coal mines in Mozambique and Australia.
Due to major expansion plans of steel firms, securing raw materials is crucial for them. By 2020, more than 70 million tonnes of coking coal will be required, of which 85 per cent will have to be imported if not produced domestically, the official said.