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West Bengal's single largest investment, JSW Steel's Rs 35,000-crore steel and power project, has run into rough weather after the state government cancelled the power purchase agreement (PPA) with the company.
The project - which comprises a steel plant that can produce 10 million tonnes a year and a 1,620-Mw power plant - has had run-ins with the state government since Mamata Banerjee took over as chief minister.
Last year, the West Bengal government and JSW Steel had reached an understanding that work on the power project would be taken up first, since the steel plant was held up for want of iron ore.
The first phase of the power project was to have a capacity of 600 Mw. Accordingly, the company had signed a PPA with the state government for 300 Mw. That agreement has now been cancelled, as there is no requirement, state government officials said.
"PPAs with JSW and some others have been cancelled. West Bengal is a power-surplus state. There are already some projects of the state power utility that are coming up, along with NTPC's Katwa project," an official explained.
Two units of 500 Mw each of West Bengal Power Development Corporation at Sagardighi, 250 Mw of Durgapur Projects; and CESC's two Haldia units of 300 Mw each are some of the additions that will come up over the next few years. The state power department feels these will be enough to take care of future demand.
Officials in the state power department also said industrial demand, which accounts for 40 per cent of total power consumption in the state, has not gone up in the past year as expected, contributing to surplus power.
On Monday, Banerjee had threatened that the 4,300 acres allocated at Salboni in Paschim Medinipur would be taken back if the company did not start work immediately.
However, sources close to the development said there was no official communication from the state government on this.
JSW said on Tuesday that it was committed to the Bengal project and had already spent about Rs 600 crore.
"Unfortunately, iron ore - a critical input for steel making - is not made available to steel companies that were set up after liberalisation for value addition within India. Instead, India granted mining concessions to merchant miners encouraging export of iron ore and import of steel. Compounding the problem, iron ore-bearing states are now restraining the movement of iron ore to other states threatening the survival of steel companies in non-iron ore bearing states. In these circumstances, JSW Steel requested the West Bengal government to facilitate long-term sustainable supply of iron ore to take up active implementation of the Bengal steel project," the company states.
According to a senior minister, the government is of the view that the company would not be able to start work on the project in the near-term. "The main problem is iron ore. Where will they source it from? If they don't have iron ore linkages, banks will not lend," the minister pointed out.
The iron ore problem is so acute because of the clampdown in Karnataka and Odisha, that JSW Steel will be importing six million tonnes of high-grade iron ore this year to cater to its existing steel facilities.
Trouble started in 2011 when it came to light that the company had not signed the lease agreement even though it got permissible possession of land in 2007 from the then government, led by the Left parties.
The company had not obtained a '14Y exemption' from the government for the 300 acres it had directly purchased from land owners. The Land Reforms Act places a ceiling of 24 acres on land acquisition and section 14Y exempts the ceiling. The exemption came later.
HOT IRON
- 600 Mw Capacity of first phase of JSW power project
- 300 Mw Capacity for which a PPA was signed between the company and the state government
- 40% Share of power consumption by industrial units in the state
- 4,300 acres Area of land that Mamata Banerjee had threatened that would be taken back if the company did not start work soon
