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09. March 2012

Indian government scraps plans for ultra mega steel plants

BS reported that union government has scrapped its plan to promote Ultra Mega Steel Plants. Each plant was expected to have a capacity of 10 million tonnes per annum. The idea was to give a big boost in the effort to meet burgeoning demand in Asia’s third largest economy.

This comes when the sector is slowing, with low demand, a halt in commissioning of new projects and a severe raw material crunch. Steel is one of the eight core infrastructure industries that have a combined weight of 38% in the Index of Industrial Production.

The decision has come after heavy protests from mineral-rich states, which saw the proposed mega projects as resource guzzlers. Also, there’s a conflict of opinion between the government and industry over linking captive mines to these projects.

A senior official told Business Standard that “The plan has been done away with. The state governments were not cooperating. Most states said they cannot commit resources like land for such projects. Without land, this cannot be done.” He added that major dissenters included the mineral rich states of Orissa, Jharkhand, Chhattisgarh and Karnataka.

A senior official from the steel ministry declined to comment, adding that “No such UMSP policy was notified. Discussions with the stakeholders are going on. It is an ongoing process.”

Setting up a steel plant of 10 million tonne per annum capacity requires around INR 50,000 crore of investment. Also, every such plant consumes 16 million tonne of iron ore and 10 million tonne of coking coal annually. The huge funding and raw material requirement, coupled with heavy land, water and power demand, pushes up input costs of large-sized steel plants. The industry was, therefore, demanding captive mines linked with UMSPs.

The ministry’s plan included setting up a Steel Finance Corporation as a Special Purpose Vehicle to meet the funding requirement for these projects, on the lines of the Power Finance Corporation in the power sector. Last year, the ministry had asked PFC Consulting Ltd to prepare a concept paper on UMSPs.

Source - Business Standard

Sourced from steelguru.com

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