Vizag Steel Plant mulls joint venture with NMDC for iron ore

Visakhapatnam Steel Plant (VSP) is exploring the possibilities of a joint venture with state-owned National Mineral Development Corporation (NMDC) to meet its future requirements of iron ore. Currently, NMDC supplies iron ore to VSP from its Bailadilla mines.

VSP is trying hard for captive iron ore mines for the last two years. As of now, VSP requires about 58-60 lakh tonnes a year of iron ore. But after its expansion ie by 2008, the iron ore requirement will almost double.

"If we have our own captive iron ore mines, our ore procurement cost will be reduced by 20-30 per cent. Apart from this, a large company should not depend on other mining companies for ore allotments for a long time. Owing to these reasons, we are trying for captive mines," Y Siva Sagar Rao, chairman-cum-managing director, VSP, told Business Standard.

VSP identified captive ore mines in Orissa and Chhattisgarh but had to shelve its plans as both the states did not respond positively. VSP even tried the low grade iron ore mines which are available in Prakasam district of Andhra Pradesh. But these mines were already allotted to a private party by the state government.

With all its efforts failing, VSP is now finally looking at Bailadilla mines, which are under the control of NDMC.

"At present, we are getting sufficient iron ore from Bailadilla mines. And now, as NMDC is opening new mines, for which they will require around Rs 500 crore, we are planning to approach them for a joint venture," a senior official from VSP said.

NMDC has decided to open a new mine -- 11B at Bailadilla. A detailed project and a feasibility report have already been prepared. "We have sufficient reserves to invest in opening of new mines. Anyhow, the higher management will take decisions on joint ventures," a senior NMDC official told Business Standard.

During 2004-05, NMDC dispatched 17.5 million tonnes of iron ore from Bailadilla mines as compared to 16.3 million tonnes in 2003-04.

NMDC supplied about 58.49 lakh tonnes of ore to VSP, 40.51 lakh tonnes to Vizag-based Hy-grade Pellets Limited, 47.65 lakh tonnes to MMTC for exports, 12.06 lakh tonnes to Ispat Industries Limited and 5.77 lakh tonnes to Vikram Ispat Industries from Bailadilla mines in the year ended March 31, 2005. NMDC itself exported about 8 lakh tonnes of iron ore to China from the same mines.