The much talked-about joint venture between state-owned miner NMDC and Russian steelmaker Severstal continues to languish on the drawing board, as neither is ready to be a minority stakeholder.
The two companies had signed a memorandum of association in 2010. In late 2011, they formed a joint venture company to set up a three-million tonne steel plant in Karnataka for Rs 20,000 crore. The two companies held equal share in the joint venture, in which NMDC was to supply iron ore for the steel plant, while Severstal would supply coking coal from its mines in Russia. However, Severstal now plans to have the majority stake in the venture, something unacceptable to NMDC.
In May, NMDC had said the two companies were likely to resolve the ownership dispute by June-July. But the tussle seems far from over.
NMDC did not comment for this story.
The agreement between the two companies stated the capacity of the plant could later be expanded to five million tonnes. According to the original schedule, the plant is supposed to start production by 2017. “This deadline looks a bit ambitious, given the two are in a tussle over controlling the company, leave alone sourcing iron ore and coking coal for the project,” said an analyst tracking the sector.
The agreement also stated the two would set up two subsidiaries for sourcing the raw materials used to manufacture steel — iron ore and coking coal. These subsidiaries are also stuck due to logistical issues. The coking coal block of Severstal, which would supply raw material to the proposed plant, is far from the nearest port. NMDC has also clarified it would not use iron ore from its existing mines, asking the government to allot iron ore that would exclusively be used to produce steel at the proposed plant in Karnataka.
The plant would need 2,880 acres and NMDC has already made an advance payment to Karnataka government for the land.