The Centre is offering substantial equity to the state governments to motivate them in implementing greenfield steel projects in a time-bound manner.
The government is doing so by floating special purpose vehicles (SPVs) with states thereby making them a stakeholder in such projects. This is a new phenomenon so far steel projects are concerned. Central PSUs and mining corporations of the states would join hands to form such SPVs, in which the former would hold at least 51 per cent equity and the remaining will be with the states. However, state governments are expected to provide land, water and regulatory clearances.
“We have begun this SPV mechanism to fast-track the proposed projects. The PSUs have taken the lead so far and foreign companies are also enthused by this dispensation. In my interactions with the state governments, I found them encouraging this SPV system,” steel and mines minister Narendra Singh Tomar told The Indian Express.
State-run iron ore producer NMDC entered into a MoU with Chhattisgarh State Mining Development Corporation (CSMDC) and state-run steelmaker SAIL on May 8 to set up a 6 million tonne (MT) steel project in Bastar district of the state. The mining firm is also preparing to sign an agreement with Jharkhand State Mining Development Corporation for another 6 MT greenfield project in the state for which three sites have been identified — Saraikela, Chakradharpur and Kumardudungi. “To me this is a win-win situation for both central and state PSUs. We can synergise our efforts to fructify the proposed projects, which would serve as economic lifeline in the backward areas,” NMDC chairman Narendra Kothari said.
At a meeting convened by Jharkhand chief secretary Rajiv Gauba on May 12 in Ranchi, senior steel ministry officials said NMDC has planned to set up a 3 MT steel plant in Jharkhand and is keen to sign a MoU with the state government on the lines of the PSU’s MoU with Chhattisgarh government.
According to a senior Jharkhand government official, two SPVs would be set up. One for developing mine for the proposed plant and the other one for setting up the steel project. A MoU between both the PSUs is likely this month. Foreign firms like Arcelor Mittal and Posco, which are struggling to implement their projects, seemed enthused by the new model. While Arcelor Mittal has moved out of its Odisha project, it is keen to set up a steel plant in Jharkhand. On May 22, Arcelor Mittal and SAIL signed a MoU to set up an automotive-grade steel plant in India. A steel ministry source said the project is likely to come up adjacent to SAIL’s Rourkela plant. According to the joint statement by both the firms, ‘in the coming months, a working group comprising representatives from both the companies will work on evaluating a structure for the proposed JV and carry out feasibility studies as part of a comprehensive due diligence process’.
It is learnt that Posco and SAIL are also working out modalities to jointly set up a steel project through SPVs in addition to the South Korean firm’s proposed Rs 52,000 crore plant at Jagatsinghpur in Odisha. A team of officials had recently toured Korea to have talks with the Posco management.
SAIL chairman CS Verma is a vocal supporter of this mechanism, which he argues would work well on the ground. “We have adequate land to set up projects based on the SPV model. Secondly we have trained personnel and requisite expertise in setting them up. Most importantly, the state governments would be on the board right from the beginning and would gladly facilitate them,” Verma argues.
He contended that the state mining firms would be crucial in paving the way for mining operations and ensure backward integration for the proposed plants.
Tomar believes that such SPVs would serve as the right marriage of latest technology and the required financial wherewithal in implementing the proposed projects. After amendments in the mining and coal Acts, the firms are free to bid for mining leases to secure perpetual raw material security, while the PSUs can avail leases through the government dispensation route.
Other sectors besides steel are also joining in. Coal India is also preparing to ink MoUs for setting up SPVs with the railways and state governments to develop last mile connectivity in their respective territories.
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