The companies disagree on equity stakes, technology sharing.
The proposed Rs 11,000-crore joint venture between state-run Steel Authority of India Ltd (SAIL) and Korean steelmaker Posco seems to have hit some major roadblocks, even as the detailed project report (DPR) is being prepared.
The proposed 1.5-million tonne per annum (mtpa) unit, to be set up at Bokaro, Jharkhand, has run into a series of contentious issues, triggering hard negotiations from both sides.
Posco, it appears, wants majority stake. “Posco is being extremely difficult. This (the shareholding issue) was not what was initially decided when the memorandum of understanding (MoU) was signed, but they are now severely insisting on it,” a senior official in the negotiations told Business Standard.
Upscale JV
The MoU to set up the plant near SAIL’s existing unit in Bokaro was signed this May, to explore upstream and downstream opportunities based on Posco’s patented FINEX technology, which utilises iron ore fines for steel making, and manufacture and commercialisation of CRNO and CRGO steel. CRNO (Cold Rolled Non-Grain Oriented) sheets are used in electric motors and CRGO (Cold Rolled Grain Oriented) in transformers, generators and boilers for large-scale power plants.
The two companies had decided to eventually double the capacity to three mtpa. The two are also in talks to set up another 300,000-400,000-tonne CRNO steel mill in Maharashtra, at an estimated investment of Rs 15,000 crore. A feasibility study for doing so is being conducted.
Posco has refused to transfer the patented technology to SAIL and is willing to share it only for the joint venture entity. This has not gone down well with SAIL, which demands the technology be shared. “While they are getting the land from SAIL, they are not transferring the technology. It would take a while for the project to take off,” the official said.
Specialised steel like CRNO and CRGO is not being produced in India. Only a handful of entities in the world have the technological wherewithal to do so. It is imported into India by companies such as Bharat Heavy Electricals, at extremely high cost, from the US, Germany, Japan and China. Another block facing the JV is the cost of production of such high-quality steel. It is turning out to be Rs 14,500 per tonne, which is, on the face of it, financially unviable.
Hopes
Earlier this month, SAIL Chairman C S Verma had said the DPR would be finalised by December and within three years from then, the plant would get going.
The JV would help SAIL in increasing its annual production capacity to 23 million tonnes from 14 million tonnes at present and to enhance its access to the latest technology in steel production. For Posco, this tie-up would finally propel it into the country’s steel making industry. They have been battling to enter the market for the past five years through their $12-billion project in Orissa, stalled due to various controversies on land acquisition and protests by the residents and local bodies there.
