Steel firms turn pessimistic on Afghan project

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New Delhi | Updated: April 28, 2015 5:15:56 AM

SAIL and NMDC have 20% and 18% stakes, respectively, in the Afghan venture.

SteelA consortium of seven Indian steelmakers led by state-run Steel Authority of India (SAIL) has developed cold feet over a proposed steel, power and mining project at Hajigak in Afghanistan due to security concerns. (PTI)

A consortium of seven Indian steelmakers led by state-run Steel Authority of India (SAIL) has developed cold feet over a proposed steel, power and mining project at Hajigak in Afghanistan due to security concerns. The companies’ apprehensions have put a question mark on the project that was first conceived in 2011 with a planned cumulative investment of $10.8 billion but pruned by 75% later.

“Considering the issues related to investing in Afghanistan and recent events (in the country) like (the) attack on the Indian consulate in Herat, the attack of a SpiceJet plane at Kabul airport and the latest attack on a UK Embassy car in Kabul, the consortium members are apprehensive in pursuing the project,” SAIL wrote to the steel ministry recently.

Sources, however, said that the inter-ministerial group consisting of representatives of the ministries of external affairs, steel, railways and finance at its latest meeting in January had decided that the consortium should stay engaged with the project. So, they said, the Indian companies were unlikely to pull out of the project at this juncture.

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“Let’s wait and see. I can’t say it (the project) has been scrapped. The project was subject to so many issues,” SAIL chairman CS Verma recently told FE, when asked about the future of the project.

Apprehensions expressed by the consortium members over the project might come up for discussion when Afghan President Ashraf Ghani meets Prime Minister Narendra Modi during his scheduled maiden visit into India. Ghani has postponed his visit by a few hours (he was slated to reach New Delhi by Monday evening) due to a Taliban attack in the northern province of Kunduz.

Security concerns have been weighing heavily on the project since the consortium, Afghan Iron and Steel Consortium, won the bids for three iron ore mines at Hajigak with estimated reserves of 1.28 billion tonnes in 2011. The original plan was to set up a 6.12 mtpa steel mill, an 800 MW power plant and necessary infrastructure. This was meant to be the biggest foreign investment proposal by Indian steel firms. Attempting to reduce the vulnerability of the project in the war-torn country, the investment plan was pruned to just $2.9 billion for a 1.25 mtpa steel plant, 120 MW power plant and for creation of necessary infrastructure.

Citing delay and uncertainty hovering over the venture, state-run Rashtriya Ispat Nigam, which has an 18% stake in the special purpose vehicle, had earlier written to the steel ministry seeking to reduce its stake in the venture to “as low as possible”. A company official had earlier said, “The company does not want to park up its funds in a far-flung project that is full of uncertainty and already much delayed.”

SAIL and NMDC have 20% and 18% stakes, respectively, in the Afghan venture. Private-sector JSW Steel and JSPL hold 16% each, while JSW Ispat and Monnet Ispat have 8% and 4% stakes, respectively.

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