Business IdeasIt's Destination K'taka for steel firms
Major steel makers are facing inordinate delays in acquiring land in the east.
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It’s Destination Karnataka for steel companies. Having faced inordinate delays in land acquisition in the traditional mineral belt of the east, the companies are now betting big on Karnataka.
Last month, the world’s largest steel maker, ArcelorMittal, sought approval from the Karnataka government for a six-million-tonne steel plant, four years after signing a memorandum of understanding (MoU) with the Jharkhand government for setting up a plant, which hasn’t happened. Earlier this month, Posco, the South Korean steel major, did a recce of the southern state and may look at setting up a 4-6 mt plant.
The proposed projects would be part of at least 35 mt capacity lined up for Karnataka, putting it close behind the mega projects of Jharkhand, Orissa and Chhattisgarh, though its iron ore reserves are half that of each of these states.
A RACE FOR RESOURCES
Resources of iron ore (haematite and magnetite as percentage of total resources)
Haematite
Magnetite
Andhra Pradesh
13.70
Chhattisgarh
19
Goa
2.02
Jharkhand
27
0.09
Karnataka
10
73.80
Madhya Pradesh
Maharashtra
Orissa
33
NMDC, Essar Steel and Tata Metaliks are looking at the Bellary-Hospet region of Karnataka. JSW Steel will more than double its capacity at Vijaynagar (Bellary) to 16 mt. The additional capacity across the state’s northern districts of Bagalkot, Bellary and Koppal would be in excess of 35 mt, while the iron ore reserves are around 1.2 billion tonnes, about 40 per cent short of what the projects would require.
Resources of iron ore (haematite, magnetite as percentage of total resources)
Companies
Capacity
JSW Steel
9*
Essar Steel
NMDC
Posco
4-6#
Tata Metaliks
3-5
* (brownfield) #(not firmed up)
Figures in (million tonnes)
Currently, around 42 mt of iron ore is mined, of which 30 mt is exported. JSW Steel consumes 12 mt of iron ore a year.
Karnataka has 10 per cent of the country’s haematite (high grade) iron ore resources, compared to 19 per cent in Chhattisgarh, 27 per cent in Jharkhand and 33 per cent in Orissa. Ironically, Karnataka has 73 per cent of total magnetite (low grade) iron ore resources, but in the ecologically and environmentally sensitive region of the Western Ghats.
Says Vinod Nowal, JSW Steel’s director and chief executive officer of the Vijaynagar works: “If the government wants to bring in investors, it will have to change the mining policy, ban exports and reserve the ore for value addition. Also, it should explore whether mining can be done in the Western Ghats.”
The state too had a plan to ban exports, said an investor, and hence the initiative to bring in investors. “The Karnataka government has decided not to issue or renew mining leases if the ore is exported,” said the source. But there was no clarity on existing leases. Thirty million tonnes of exports would deplete about 75 per cent of the region’s reserves.
If the government fails to ban exports, then the resource crunch will hit the projects. The lessons learnt in the past four-five years have taught companies to exercise caution.
Harsh K Jha, managing director, Tata Metaliks, said, “We are not making investments till the state recommendssupply of iron ore.” This is understandable, given that JSW Steel has not been allocated mines in the past 15 years.
Tata Metaliks plans to set up a 3-5 mt plant and moved to Karnataka after facing delays in land acquisition in West Bengal.
The other problem that could impact steel projects was water. “The only source of water is Almati. It’s unlikely to be able to cater to so many plants,” said a source.
However, the silver lining is that unlike their experience in other states, the companies are confident that land will not be a problem. The state government is following the model prescribed in the proposed Land Bill for some projects. The companies will have to get consent from 75 per cent of the land losers and the government would step in for the balance.
After waiting for years in other states, the industry is hoping that Karnataka too does not land in the MoU heap, where projects remain only on paper.