Tags:
Journalism of Courage
We walk together… Jharkhand government-Mittal Steel. Smridhi Ke Sanjhedar (Partners for prosperity)… Jharkhand government-Tata Steel. Billboards with such slogans are a common sight in Ranchi, Jharkhand’s capital.
The Jindals, the Tatas and the Mittals are all there. In fact, over three dozen medium and big steel makers have made a beeline to set up mega steel plants in Jharkhand and Orissa, raising doubts about the viability of their new projects. They have planned to invest over Rs 1 lakh crore each in both states.
In fact, the Jindals and the Tatas are gearing to lay foundation stones of their new projects (Rs 12,000 crore and Rs 53,000 crore respectively) on November 15 — Jharkhand’s fifth establishment day.
Hot spots
Jharkhand has now become a hot destination for steel barons like LN Mittal (Rs 40,000 crore investment). Its neighbour Orissa also saw a couple of mega steel investment proposals recently. South Korea’s Posco has proposed to invest Rs 52,000 crore in a 12 million tpa steel plant. Later, Jindal Steel (Rs 13,000 crore project to produce 6 million tpa) and Essar (Rs 10,700 crore for a 4 million tpa project) too rushed in. Others, like the Murugappa group, have similar plans. Their argument: with accelerated economic activity, India’s steel production was expected to grow from 35 mt to 50 mt in 2008 and 75 mt in 2012. To meet this demand, they need iron ore — hematite. As per a Bureau of Mines survey in 1995, India has 10,053 mt of reserves of hematite.
The doubters
However, not many are buying this argument. ‘‘Only some of these projects will take shape. If all the projects mooted so far come up, there will be a massive surplus,’’ said D.R. Dogra, ED of rating firm, CARE.
Steel analysts said there’s no way the planned additional capacity can be sold. ‘‘I don’t think there’s scope for so many huge projects. It’s a cyclical industry. I’m bearish on steel now,’’ said VK Sharma of Anagram Stockbroking.
Experts also point to the steel boom and bust in 1994-96 when many companies entered the steel sector with huge investments and excess capacity was created. Some of those projects (like Malvika Steel and Mid-east Integrated Steel) are still lying unfinished while banks have piled up huge bad loans. ‘‘Unlike 1994-96, more projects will take shape this time. But I expect a correction among the new proposals soon,’’ said Mahesh Vyas, ED, Centre for Monitoring Indian Economy.
‘‘Many companies are looking mainly at the vast iron mines in India,’’ adds Dogra.
Although Orissa is the biggest hematite-bearing state, its reserves had shrunk with investors including Posco slicing away a large chunk for their projects. Other states like MP, Karnataka, Goa and Maharashtra lacked 1,000 mt reserves of hematite needed by Tata and Mittal for their plants.
Moreover, in the absence of coal in these states, steel operations are considered unviable.
Nevertheless, several experts say Jharkhand and Orissa still have potential for more steel projects. ‘‘In Jharkhand, hematite, coal and labour are available in plenty to produce steel at the cheapest possible prices,’’ said M.P. Srivastava of SAIL’s research and development Centre.
Landing in
But land will be crucial here. For Jindal, Tata and Mittal, 55,000 acres are needed. The job at hand for the government is to find land, acquire and provide it to investors.
But government mandarins are hopeful. “With the rehabilitation policy ready to offer land prices at the current market rate, there is no reason why land can’t be acquired,” said Jharkhand Secretary (Industry) SK Satpathy.
Land acquisition is only the first step. Whether demand matches supplies for the new projects needs to be seen.
