Essar signs deal with 4 Bangladesh steel cos

A consortium of four steel companies from Bangladesh has signed a deal with India's Essar Group to set up hot-rolled steel plant, reports said here today.

S Alam, PHP, KDS and Abul Khair signed the Memorandum of Understanding (MoU) with the Indian group for the joint venture where Essar would hold a majority 60 per cent stake, The Daily Star report said.

In the JV, Essar Bangladesh Ltd, would invest about $550 million in setting up the steel plant in southeastern port city of Chittagong with an annual capacity of 2 million tonnes. The plant is likely to start production in 2010.

"We signed the MoU in Delhi in February this year and we expect the ground breaking ceremony after signing the final joint venture agreement with the group," S Alam Group Managing Director Saiful Alam Masud said. The JV is awaiting a clearance from Bangladesh's Board of Investment.

Earlier, the consortium imported billets for their re-rolling steel mills in Bangladesh from Essar's plant in the Indian coastal state of Orissa.

With a steel plant in Chittagong, there would be no need for imports once Essar Bangladesh Ltd starts commercial production.

Masud said the company would not seek tax and other special incentives as many investors had sought earlier. "We have sought funds from Islamic Development Bank of Saudi Arabia for the project and negotiations are underway," Masud said. A good portion of the project expenditure would be funded by Islamic Development Bank (IDB), he added.

According to reports the government has been considering some of the private industrial groups' proposal to set up a basic iron industry in the country to cope with the burgeoning crisis of steel industries.