NMDC lines up $3.2 bn to set up plants

National Mineral Development Corporation (NMDC), India's biggest state-run iron-ore producer, said it will spend Rs 13,500 crore ($3.2 billion) to raise output, build steel and iron plants and invest in coal mines overseas.

The Hyderabad-based company will invest Rs 3,500 crore to boost its iron-ore production by 85 per cent, Chairman B Ramesh Kumar said in an e-mailed statement. A further Rs 9,000 crore will be spent on iron, steel and power plants, while Rs 100 crore would be earmarked for coal-mine purchases.

Indian iron-ore miners and steelmakers are boosting output to feed the rising demand as the nation uses more of the metal in buildings, cars and appliances. Asia's fourth-largest economy has grown 8 per cent annually in the past three years, stoking demand for coal from steelmakers and power generators.

NMDC will use its own funds to expand, Kumar said today by phone from Hyderabad. The company had reserves of Rs 7000 crore on March 31 and is debt-free, he said. "We have enough money to fund these expansion plans and may borrow if necessary,'' Kumar added.

NMDC will invest Rs 1000 crore in a so-called special purpose vehicle, which will be set up with four other state-run companies, including NTPC, to bid for coal mines abroad, Kumar said. Tata Power, the nation's second biggest utility by sales, agreed on March 31 to pay $1.3 billion for a 30 per cent stake in two coal mining units in Indonesia.

The special company, which will have a total fund of $2.3 billion, will be set up jointly by Coal India. NTPC, Steel Authority of India, Rashtriya Ispat Nigam and NMDC, Coal India chairman P S Bhattacharyya said.