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The Steel Authority of India Ltd (SAIL) is exploring the possibility of setting up a special steel venture with Japan's Kobe Steel.
“We are discussing the possibility. Investment, location and equity structure have not been decided. The special steel could be used in the defence sector or automobiles,” SAIL chairman, C S Verma said.
If it materialises, it would be SAIL's second venture with Kobe.
Last year, SAIL had signed a Memorandum of Understanding with Kobe for an iron nugget plant, using the Japanese steelmaker's ITmK3 technology, for a 0.5 million tonne pilot project. The project would come up at SAIL's Alloy Steel Plant in Durgapur.
“Kobe is a pioneer in the special steel area and hence, we are discussing various ventures, which would be separate from the iron nugget one,” Verma explained.
While SAIL's partnership with Kobe appears to be on track, the venture with Posco is stuck.
SAIL and Posco were in talks for a three million tonne steel plant at Bokaro in Jharkhand.
“We remain companions in the sector, but it need not necessarily result in a joint venture. We are working on our respective projects,” Verma said.
SAIL is busy with its modernisation and expansion plan. At the end of the financial year, SAIL would have an installed capacity of 19 million tonnes, up from the current 14 million tonnes.
“Bhilai expansion would happen in the next financial year, which would take the capacity to 23.5 million tonnes,” Verma said, brushing aside popular perception that SAIL's modernisation and expansion programme was running behind schedule.
However, SAIL has pushed back its long-term target of 50 million tonnes hot metal capacity to 2025 from 2020.
The revised deadline is to align with the government's target of 300 million tonnes of installed capacity by 2025, the roadmap for which is being prepared by the steel ministry. At present, the installed capacity in India is around 90 million tonnes, making the target seem ambitious.
Verma pointed out that there were challenges that would need government intervention to realise this target.
For instance, there were issues with financing of projects. “The cost of producing a million tonne of steel is $1 billion, so to create another 200 million tonnes, around Rs 12,00,000 crore investment is required. Where will this money come from? We need a body like the Power Finance Corporation that would help finance steel projects. Banks and financial institutions have already reached the exposure limit and many companies are facing problems, though SAIL is not affected. Our networth is Rs 42,000 crore,” Verma said.
The other big challenge is that 60 per cent of the investment is in plant and machinery, most of which is imported. “We would need government help for this. There could be government to government dialogue for technology,” Verma felt.
The private sector, however, might like to add that land acquisition and mine allocation have been major hurdles for greenfield projects. Forty million tonnes of capacity addition have been either scrapped or put on the backburner on account of the twin challenges.
