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Sunday, October 23, 2011

Steel consortium asks PMO for financial help in Hajigak project

Expressindia » Story

Priyadarshi Siddhanta,priyadarshi siddhanta
Posted: Oct 24, 2011 at 0020 hrs IST

New Delhi The consortium of Indian companies, which has bid for the Hajigak iron ore mine in Afghanistan, has appealed to the Prime Minister’s Office (PMO) for financial assistance in executing the ambitious project. The move comes amid a growing realisation among the companies that they may not be able to mobilise adequate money to explore the mine and build infrastructure to evacuate the produce.
In a recent letter to the steel ministry, consortium chief and chairman of Steel Authority of India Ltd (SAIL) CS Verma approached the steel ministry to apprise the PMO of the need for providing money in the event of the consortium winning the bid for the Hajigak mines, for which it put out a bid on September 3.

While SAIL officials refused to comment on this issue, steel ministry officials indicated that the consortium wants financial assistance of about at least Rs 3,000 crore. “The consortium has few major players apart from SAIL and mineral giant NMDC. While the Tatas opted out of it, Essar Steel was kept out,” steel ministry sources told The Indian Express.

They said that the matter will be discussed threadbare with the consortium partners before the ministry forms its opinion on the issue.

The consortium is led by maharatna SAIL with 18 per cent shareholding while NMDC and RINL hold 17 per cent each. Among private players JSW and JSPL hold 16 per cent each, while JSW Ispat and Monnet Ispat & Energy hold 8 per cent and 4 per cent stake respectively. The announcement of preferred and reserved bidders was expected to be made by the Afghan mines ministry by October 4 but has been deferred by a month.

The consortium has planned to develop the Hajigak mines located in Afghanistan’s mountainous Bamiyan province, 130 km west of Kabul. The mines have an estimated reserves of about 1.8 billion tonnes of high-grade iron ore.

Knowing that the investments needed will be enormous in case Indian consortium won the bid and given the generally depressed financial performance of the steel companies, the consortium has sought the PMO’s approval for monetary support, sources said.

As per the bid conditions of the Hamid Karzai government, the bidders had to submit a refundable bid bond of Rs 2.5 crore each and all royalties, cess and duties will have to be paid by them. Considering that the annual investment needed would be to the tune of Rs 22.5 crore or more, the total estimated investment required would be nearly Rs 700 crore alone for setting up exploration facilities besides a huge spend to be incurred on developing the evacuation infrastructure, including setting up a railway line and setting up a steel making facility.

Rising input costs have exerted high pressures on the margins of the steel firms. SAIL registered a 29 per cent in its net profits, while Naveen Jindal promoted Jindal Steel and Power Ltd posted a 3 per cent dip in its profit margins. Similarly, Sajjan Jindal promoted JSW Steel did comparatively much better.

Express India

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