Divestment of NMDC’s unit in Chhattisgarh put on hold

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New Delhi | Published: September 3, 2018 2:08:48 AM

Nearly two years after giving the go-ahead for strategic disinvestment for NMDC's under-construction steel plant at Nagarnar in Chhattisgarh, the Centre has put the plan in abeyance.

Divestment of NMDC’s unit in Chhattisgarh put on hold

Nearly two years after giving the go-ahead for strategic disinvestment for NMDC’s under-construction steel plant at Nagarnar in Chhattisgarh, the Centre has put the plan in abeyance.

Apprehending huge monetary loss and a further delay in project commissioning due to local agitation if the plan is implemented, the state-run miner had requested the Prime Minister’s Office (PMO) to put it on hold till the 3 million tonne per annum steel plant gets commissioned by March next year.

A pure-play miner, NMDC had in 2009-10 conceived the Nagarnar plant with the intention of moving up the value chain and diversifying its portfolio. The idea was also to hedge itself against vagaries of iron ore prices.

Questions were raised on the decision in the steel ministry itself as many felt NMDC would better serve its mandate by harnessing its mining expertise.

In November 2016, when the plant was half-way through, the Cabinet Committee of Economic Affairs’ decision to offload 51% equity in the unit in favour of a private company did not go down well with a section of company. Also, the local government expressed its reservations, saying that the Left-wing extremism in the Bastar district, where the plant is located, could regain ferocity if the Centre goes ahead with a plan to privatise the under-construction plant.

Despite all these, the Centre was firm in its decision as it felt that a private strategic partner was essential for the venture, since NMDC does not have the necessary expertise to run a steel plant of such a size, and a private partner with experience could bridge this deficit.

Replying to Chhattisgarh chief minister Raman Singh’s contention that the move would result “in serious image deficit for the government” and could trigger unrest in the region, the Centre had said that the alliance won’t result in job losses or reckless exploitation of natural resources.

Though the disinvestment proposal did not make any progress since then, the plan itself was fuelling a feeling of discontent among those who gave up their land for the steel plant. They wanted the unit to retain its public sector character and were against giving the management control to a private firm. Apart from compensation, NMDC has offered one job for each of those 838 families. NMDC has already completed imparting training to make one each from all the families employable in the plant.

An NMDC source said the proposed disinvestment would also go against the interest of the company since an under-construction plant is generally under-valued. Time overrun has led to the cost overrun for the steel plant. Against the initial estimated expenditure of Rs 15,525 crore for the steel plant, NMDC might eventually end up spending around `18,000 crore, of which `14,000 crore has already gone into the grounds. NMDC has spent all the money from its own coffers.

The government has been toying with the idea of disinvestment of the unit for long. Representatives from South Korean steel major Posco, which has been struggling to find a solid foothold in India for long, had also visited the plant.

NMDC was also considering offering the maintenance and operational contract for the plant to another PSU steelmaker Rashtriya Ispat Nigam in lieu of sharing a fixed percentage of annual profit, but that has not worked so far. The steel ministry has already ruled out SAIL partnering in the venture as its “plate is already full”.

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