Source: Business Standard
Having tripped on land and captive mines last time, Posco will tread cautiously when it comes to setting up a greenfield steel plant in India.
Posco officials had visited Andhra Pradesh to explore the possibility of setting up an integrated steel plant but it was more of a recce. “The government wanted Posco to consider investing in a joint venture with RINL (Rashtriya Ispat Nigam) and we just went to check out. We have not decided on the specifics. Building a greenfield steel mill in India is not easy,” said G H Bang, managing director, Posco Maharashtra.
Exploratory talks with state-owned RINL had, in fact, started last year when a delegation led by the South Korean ambassador was at the plant site but Posco is yet to firm up plans. What's possibly coming in the way is its past experience with regard to setting up an integrated steel plant in India.
Posco signed a memorandum of understanding (MoU) in 2005 to set up a 12 million steel plant for setting up a 12 million tonne steel plant near Paradip with an investment of Rs 52,000 crore what was pegged to be India’s largest-single foreign direct investment (FDI). But the project never took off largely due to a struggle against land acquisition as also uncertainty over captive iron ore mines. It’s not that Posco doesn’t have a presence in India. Bang reminded Posco had invested Rs 8,000 crore in a two million tonne unit. It has a downstream unit in Maharashtra.
ArcelorMittal and Nippon are acquiring Essar instead of setting up a greenfield project, Bang pointed out.
Ironically, ArcelorMittal too tried setting up a greenfield plant around the same time as Posco, in Odisha first, then Jharkhand and finally Karnataka. However, none of the greenfield projects have so far materialised though Arcelor is believed to be making attempts to revive the Karnataka project.
Both Posco and ArcelorMittal had signed MoUs for integrated steel plants at a time when signing agreements for setting up mega steel plants had become regular. Projects announced at that point exceeded a capacity of 100 million tonnes, but hardly any materialised with land woes and captive mines turning out to be the biggest stumbling blocks.
Jayanta Roy, senior vice-president, ICRA said, the hurdles in setting up greenfield plants in India was one of the primary reasons why there was a tug of war for the steel companies that were mandated by the Reserve Bank of India (RBI) for debt resolution under the Insolvency and Bankruptcy Code (IBC).
"These were ready capacities with all clearances in place. A strategic strong player would be able to turn around the plant," he explained.
ArcelorMittal has been fighting a pitched battle for almost two years now to complete the transaction for acquiring Essar. But then it had struggled much longer to set up greenfield plants in India.
In 2005, it signed an MoU with Jharkhand for a 12 million tonne plant and in 2006 for a similar size in Odisha. Later it signed for a smaller plant in Karnataka as well. But none of the plants made any progress and in 2013, the world's largest steelmaker pulled the plug on Odisha.
The scenario for the greenfield projects hasn't changed since then. In the next five years, India is poised to add a capacity of around 20 million tonnes of which only one is a greenfield project of three million tonnes from NMDC.