The Rs 4,100 crore Jindal Vijayanagar steel plant project, hit by cost over-run, has managed to mop up most of the required funds worth Rs 830 crore for its ongoing and expansion programme.
"We have tied up 80 per cent of the funds required for completion of the project," Jindal Vijayanagar Steel Ltd (JVSL) vice-chairman S K Gupta said. The 1.6 mtpa integrated steel project is coming up near Hospet in North Karnataka.
Gupta said the total cost of the project which was Rs 4,138 crore will now shoot up to Rs 4,968 crore following the fresh injection of funds. The promoters, the O P Jindal group holds 38 per cent stake in the project, while the rest is held by financial institutions and the public. A leading FI commissioned by the promoters had suggested that an additional amount of Rs 830 crore was required to complete the entire project. Gupta said cost over-run was because of delay in project clearances leading to lag in commissioning and exchange rate fluctuation. He said out of Rs 830 crore, an amount of Rs 399 crore has been earmarked for interest during construction period and pre-operative expenses because of delay in commissioning and stabilisation.
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Among other heads, Rs 105 crore has been earmarked for additional custom duty to reduce export obligation under EPCG scheme as the government has not considered issue of further licences, Rs 66 crore for exchange rate fluctuations, Rs 82 crore for margin money for working capital and Rs 98 crore for increase in civil, structural and erection costs.
The investment envisaged for the project coming up near Hospet was Rs 3,300 crore with a capacity of 1.25 mtpa. But the cost rose to Rs 4,130 crore after the promoters decided to increase the capacity to 1.6 mtpa. Gupta said the capacity had to be upped because of delay in transfer of mines by the government. He said the delay hit the development of mines which affected sustained availability of adequate amount of lump iron ore as originally conceived.
But because of large availability of high quality of fines, the company had to advance the construction of the pellet plant which was originally part of the second phase.
This resulted in increase in production of liquid metal by around 25 per cent which led to increase in capacity of the plant.
The increase in costs by Rs 830 crore is being funded through a mix of debt and equity. While the promoters, the Jindal Group, have pumped in Rs 150 crore, the rest of the amount is through debt: Rs 111 crore through optionally fully convertible debentures; Rs 421 crore through rupee term loans; Rs 39 crore through foreign currency loan and suppliers' credit; Rs 27 crore through foreign currency loan for rupee expenditure and Rs 82 crore through export advance.
Gupta said the Corex iron making unit is expected to be commissioned in August 1998, the basic oxygen furnace (BOF) and continuous casting (CC) unit 1 is expected to be commissioned in September 1998, Corex 2 and BOF and CC by the first quarter of 1999, the 130 mw power plant by October 1998 and another 130 mw by March 1999, air separation plant unit 1 by July 1998 and unit 2 by May 1999 and the pellet plant by June 1999.