Steel secy to discuss proposals on ultra mega plants

The steel ministry is leaving no stones unturned in setting up Ultra Mega Steel Plants.

Expressing serious concern that the widening demand-supply gap was leading to an increase in steel imports,the steel ministry is leaving no stones unturned in setting up Ultra Mega Steel Plants (UMSPs) in the country. It has proposed for a Steel Finance Corporation (SFC) as a nodal agency to help set up steel plants on a fast-track basis in the next few years.

A high-level meeting to be convened by steel secretary P K Mishra on April 26,will deliberate on a slew of proposals prepared by the ministrys Joint Plant Committee to help entrepreneurs set up UMSPs.

According to the proposal,each UMSP will come with a yearly capacity of at least 10 million tonne (MT) and would be set up in mineral-rich states of Orissa,Jharkhand,Maharashtra and Chhattisgarh.

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Since such project would entail big investment,the ministry proposal is to set up SFC as a special purpose vehicle with an initial corpus of Rs 1,500 crore. The SFC would be conferred the status of a non-banking finance corporation. Each state would have a special purpose vehicle for a UMSP and would part-finance setting up of such a plant.

The project of 10 MT capacity will call for a direct investment of about Rs 50,000 crore. Even if a debt-equity ratio of 1.5:1 is considered,equity of Rs 20,000 crore will have to be mobilised for a single project, reads the ministry proposal.

The ministry plans to register SFC with the Reserve Bank of India on the lines of PFC,and it will be empowered with the flexibility to take loans and raise debt through infrastructure bonds.

Since it will be difficult for small and medium size producers to mobilise large finances required for UMSP,the SFC mechanism may include a provision of collaborative bidding, the proposal says. Two other methods being considered by the government to finance the SPV,include creating a finance company with equity contribution from the Centre and respective state governments,where the UMSPs are planned. The steel ministry also proposes creating a NBFC through equity contribution from PSUs like SAIL,NMDC and RINL.