Odisha bags proposals worth Rs 2.48 trillion from steel sector in 6 months

Raw material, port facilities, slurry pipe infrastructure make the state a "popular" choice

In the last six months, Odisha has seen a rush of investment proposals from the steel sector reminiscent of the boom during 2004-2006 as companies push the growth pedal.

Odisha has approved proposals adding up to 65.48 million tonne (mt) in the last six months and over a two-year timeframe it stands at 74.84 mt, according to Industrial Promotion and Investment Corporation of Odisha (IPICOL), the single point of contact for all industrial investments in the state.

The proposals are a mix of brownfield and greenfield projects. Among the major greenfield projects is ArcelorMittal Nippon Steel’s proposed 24 mt plant while brownfield expansion includes those of Jindal Steel & Power (JSPL), JSW’s Bhushan Power & Steel, Tata Steel.

Bhupendra Singh Poonia, managing director, IPICOL, said, in the last six months, Odisha has received proposals of Rs 2.48 trillion from the steel sector and in the last 2 years, Rs 3.49 trillion.

“Our target is to achieve more than 100 mt by 2030 and we anticipate that we will be able to meet it,” he said. Currently, Odisha has a steel capacity of 32.45 mt.

Explaining why the state has been able to attract sizable investment in the sector, Poonia said, “We have a natural advantage. Odisha has one-fourth of iron ore reserves, one fourth of coal reserves and more than 50 per cent of bauxite reserves and almost the entire chromite.”

A slew of memoranda of understanding (MoUs) were signed between 2004 and 2006 for greenfield projects adding up to 150 mt across Odisha, Jharkhand and Chhattisgarh. But the top steel producers appear to be expanding in Odisha in a major way this time around.

Factors in favour

Isha Chaudhary, director, CRISIL Research, pointed out that Odisha has 45-48 per cent of India’s iron ore reserves of higher grade (more than 62 per cent Fe) which is typically used by Indian steelmakers.

“Thereby, in order to gain raw material security, we have seen Odisha to be a popular choice for expansion plans. JSW Steel, AMNS, JSPL and many more companies have already announced expansions in the state. Also, the recent auctions that have taken place in Odisha have been bagged by several large steelmakers,” she added.

Major steel producers have bagged mines in Odisha since 2020. ArcelorMittal India Private Ltd (AMIPL) bagged an iron ore mine early 2020 while JSW Steel bagged mines with reserves of more than a billion tonnes. In the recent auctions, Tata Steel and JSPL bagged mines.

Plus, there are other advantages at play here. “Raw material security, access to port, slurry pipe infrastructure are the advantages the state offers. Ease of business has also improved with the government focus on promoting investments in the state,” said Chaudhary.

Key challenges

During the last steel boom, major steel projects had tripped on land and mines. The mine allocation policy has changed since from a nomination basis to auctions, de-risking the business model to an extent.

But land may still be a challenge, especially as far as greenfield projects are concerned. Poonia, however, pointed out that technology had reduced the land requirement for projects to a great extent.

He also said that the land acquisition act and the rehabilitation and resettlement policy followed by Odisha is one of the best in the country.

The government was acquiring land under the Land Acquisition Act 1894 during 2004-2006. But for private land, it is now following the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) Act, 2013.

But there are rumblings still at the local level for some projects. Commissioning of greenfield plants by 2030 will be a key monitorable as there are multiple challenges faced including land acquisition, lengthy approvals, higher capex costs, said Chaudhary.

Jayanta Roy, senior vice president, ICRA, also identified land and international funding for steel projects with high carbon footprint as possible challenges.

Many leading steel producers as well as several medium to small sized players are considering their capacity expansion plans now, encouraged by favourable metal prices, rising utilisation levels of existing capacities and healthier financial position, said Roy.

“However, the players need to be mindful of technology and processes to be used, given the focus of various stakeholders on environmental concerns, and the fact that the steel industry has a large carbon footprint globally,” he pointed out.

STEELMAKING IN ODISHA

Installed capacity: 32.45 mt

Target: more than 100 mt by 2030

Additional capacity approved by state government in last 6 months: 65.48 mt

Investment proposals in last 6 months: Rs 2.48 trillion