Steel firms' growth in jeopardy

The Hoda Committee recommendations, if implemented, may thwart future expansion of steel companies "" domestic as well as foreign "" in India.

The committee has recommended that steel plants already in existence on July 1, 2006, which do not have captive mines, should be given preferential allocation of iron ore mines, without the need for going through auction procedures.

This, the committee hopes, will create a level-playing field between them and the steel plants that have captive mines.

The clause implies that all fresh steel capacities will have to go through the auction procedures, which could lead to a serious escalation in their costs.

For steel companies that are allocated mines, the only cost involved is a cess of Rs 27 per tonne. However, the cost could reach any level if they go through the bidding process.

But, if a state government wants, it can waive the bidding process for a project. The committee has said states should be permitted to waive auction procedures in case a company proposed to invest in industry based on the mineral within the state.

The timing of the recommendations coincides with big-ticket investments announced by foreign steel gaints like Posco and Mittal Steel.

While Korean chaebol Posco had made public its intention to set up a 10-million-tonne-per-year (mtpa) capacity plant in Orissa sometime back, Mittal Steel announced a 12 mtpa unit last week.

Most domestic companies too have lined up ambitious expansion plans. Thus, the total steel capacity is expected to go up to 110 mtpa in 2020 from the existing 40 mtpa.