NMDC facing 50% cost overrun for a 52-month delay in Nagarnar plant completion

By: |
March 28, 2020 2:45 AM

The delays are mainly because of two reasons – repeated local agitations on the talk of privatisation of the under-construction plant and delay on the part of the BHEL to complete raw material handling.

However, questions were raised on the decision in the steel ministry as many felt NMDC would better serve its mandate by harnessing its mining expertise.However, questions were raised on the decision in the steel ministry as many felt NMDC would better serve its mandate by harnessing its mining expertise. (Representative image)

A likely 52-month delay in completion of its 3-million tonne per annum (mtpa) steel plant at Nagarnar in Chhattisgarh has caused a whopping Rs 7,615 crore cost escalation for state-run miner National Mineral Development Corporation (NMDC). According to sources, the Rs 15,525-crore green-field project, conceived in 2009-10, was estimated to be complete by March 2015. Now, it is proposed to go on stream in July this year.

“In our estimate, the cost of the project has gone up to Rs 23,140 crore, which is around a 50% cost overrun. If nothing causes further delay, the plant will now be inaugurated in July this year,” said a source. A complete lockdown in view of the spread of coronavirus could, however, further stretch the deadline.

The delays are mainly because of two reasons – repeated local agitations on the talk of privatisation of the under-construction plant and delay on the part of the BHEL to complete raw material handling.

In November 2016, when the plant was half-way through, the Cabinet Committee of Economic Affairs (CCEA) approved offloading of 51% equity of the unit in favour of a private company. The decision did not go down well with the locals, who were hoping to get jobs in state-run company in lieu of their land.

“There have been more than a dozen agitations since then by the locals, hampering works on the plant site. This has caused a huge delay in implementing the project,” the source said.

The local government had earlier expressed reservations over privatisation, citing the Left-wing extremism in the Bastar district, where the plant is located, could regain ferocity if the Centre goes ahead with the plan. But, the Centre was firm on its decision as it obtained that a private strategic partner might bridge the knowledge deficit since NMDC is a pure-play miner.

NMDC’s proposed venture into steel-making was intended at it moving up the value chain and diversify portfolio. The idea was also to hedge itself against vagaries of iron ore prices. However, questions were raised on the decision in the steel ministry as many felt NMDC would better serve its mandate by harnessing its mining expertise.

The source also said the delay in completion of the steel plant was due to delay in implementing the raw material handling system by BHEL. BHEL was awarded the Rs 1,400-crore project by NMDC in August 2011 and it was to be completed by February 2014. As there was little progress, NMDC terminated the contract in July 2019; but with promise from BHEL not to make further delay, the order was restored in August 2019.

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