Sail top brass reshuffled

Four Sail top executives have been selected to assume charge as directors for four steel plants. The directors are supposed to receive charge by the end of the current fiscal. The Sail board has cleared the selection after an interview held in New Delhi on 22 June.

The Durgapur Steel Plant will have Mr VK Gulati as its new MD after Mr SK Bhattacharya retires. Mr VK Srivastava, the ED (Works) of the Bokaro Steel Plant has been promoted to the post of MD of the same steel plant. Mr BL Singh, ED with Sails raw materials division in Kolkata, has become MD for the Rourkella Steel Plant. Mr G Ojha, ED (P&A) of Bhillai Steel Plant has been promoted to the post of director (personnel) of Sail.

The ED (P&A) of DSP, Mr Nilotpal Roy, has already been asked to join as MD, Iisco. Director of medical services with DSP, Dr VR Ramanan incidentally has resigned. His resignation was accepted two days ago. Dr S Kumar, HOD of the steel hospitals ENT department has been asked to take charge as officiating director

Essar Steel ups capacity of Hazira mill

Essar Steel has increased the capacity of its hot rolled pickled and oiled products (HRPO) mill at its Hazira steel complex to a combined annual production of 1.3 million tonnes.

A press release said this facility would enable the company to offer the products for intermediate as well as end-use applications. The mill is equipped with an electrostatic oiler to provide uniform oil coating within close tolerances as per customer-specific requirements.

Vikram Amin, Director (Sales and Marketing), said that this was part of the company's endeavour to offer value-added products.

HRPO steel finds application in the manufacture of automobile components, compressor shells, fabricators, cold rolling boiler pressure vessels and the ransport industry.

Thrust on special steel

The new steel policy, which is expected to be cleared by the Union Cabinet in July, will allow steel mills to develop a diversified product mix, with an emphasis on manufacturing special steel, for which there is a huge global demand.

Announcing this at a media conference at Visakhapatnam Steel Plant (VSP) on Thursday, the Union Steel Secretary, Mano Ranjan, said the policy would envisage export of 25 per cent of the production by 2020. As for imports, he said it stood at two million tonnes last year and this year it could be marginally up due to import of hot rolled coils.

With the prospect of new private mills dotting the steel map, he said the scenario "is good'' and particularly mentioned about the MoU signed by the Orissa government with Korea's Pohang Steel Company (Posco) for a 12 million tonne plant.

Revealing that the Public Investment Board had cleared VSP's expansion plan, he said with the formal nod from the Cabinet in a couple of months, the project, envisaging production of 6.30 million tonnes of liquid steel, should be through.

On the possibility of VSP acquiring a captive iron ore mine, he noted that it had approached the Governments of Orissa and Chhattisgarh, but they had not yet responded.

An experts group, headed by R. K. Jain, is going into the issue of setting guidelines to mineral-rich States on allotting captive mines for steel plants. It is expected to submit its report in July. Once the guidelines are approved, they will be binding on those Governments,'' he said. VSP would have no problem in going ahead with its expansion, because National Mineral

Development Corporation had agreed to supply the needed ore quantity. Mr. Mano Ranjan said the steel mills had to depend on coking coal imports from Australia, the main global supplier, and indicated a VSP-SAIL tie-up for this purpose, based on their requirements.

The Joint Secretary (Steel), S. N. Dash, and the VSP Chairman and Managing Director, Y. Siva Sagar Rao, were present at the press conference

Thrust on special steel

The new steel policy, which is expected to be cleared by the Union Cabinet in July, will allow steel mills to develop a diversified product mix, with an emphasis on manufacturing special steel, for which there is a huge global demand.

Announcing this at a media conference at Visakhapatnam Steel Plant (VSP) on Thursday, the Union Steel Secretary, Mano Ranjan, said the policy would envisage export of 25 per cent of the production by 2020. As for imports, he said it stood at two million tonnes last year and this year it could be marginally up due to import of hot rolled coils.

With the prospect of new private mills dotting the steel map, he said the scenario "is good'' and particularly mentioned about the MoU signed by the Orissa government with Korea's Pohang Steel Company (Posco) for a 12 million tonne plant.

Revealing that the Public Investment Board had cleared VSP's expansion plan, he said with the formal nod from the Cabinet in a couple of months, the project, envisaging production of 6.30 million tonnes of liquid steel, should be through.

On the possibility of VSP acquiring a captive iron ore mine, he noted that it had approached the Governments of Orissa and Chhattisgarh, but they had not yet responded.

An experts group, headed by R. K. Jain, is going into the issue of setting guidelines to mineral-rich States on allotting captive mines for steel plants. It is expected to submit its report in July. Once the guidelines are approved, they will be binding on those Governments,'' he said. VSP would have no problem in going ahead with its expansion, because National Mineral

Development Corporation had agreed to supply the needed ore quantity. Mr. Mano Ranjan said the steel mills had to depend on coking coal imports from Australia, the main global supplier, and indicated a VSP-SAIL tie-up for this purpose, based on their requirements.

The Joint Secretary (Steel), S. N. Dash, and the VSP Chairman and Managing Director, Y. Siva Sagar Rao, were present at the press conference.

Jindals sign MoU with A.P. Govt

Jindal South West Holding Limited (JSWHL), part of the $4 billion O. P. Jindal group, announced its intentions to enter the aluminium arena with the signing of a memorandum of understanding (MoU) with the Andhra Pradesh government. The company proposes to set up a refinery and smelter plant at Visakhapatnam with an investment of Rs. 9,000 crore.

The MoU was signed by Raman Madhok, Joint Managing Director and Chief Executive Officer, JSW, and B. Kripanandam, Secretary of Industries and Commerce, in the presence of the Chief Minister, Y. S. Rajasekhara Reddy, here on Friday.

Mr. Sajjan Jindal, Vice-Chairman and Managing Director of JSW Steel Limited, said in a release here that getting into aluminium was an extension of synergies for the group. Aluminium was the second most consumer metal after steel, he said. JSW at present has interests in steel, power, minerals and mining, industrial gases and port facilities. The capacity of the project at Visakhapatnam would be 1.5 million tonnes per annum for the refinery, and 2.5 lakh tonnes per annum for the smelter. It would have the potential to employ 10,000 people directly and indirectly. The raw material, bauxite ore, would be sourced from the Andhra Pradesh Mineral Development Corporation (APMDC), which will mine it independently. The take off time for the project is expected to be about three years.

Mr. Rajasekhara Reddy suggested that JSW take up initiatives to train local tribals identified by the department of Tribal Welfare. The government would try to provide exemptions from octroi and entry tax, and other incentives as extended to mega fast track projects, he said. Equity participation would be offered to APMDC

India must double steel demand to absorb new capacity

India needs to double its steel consumption in the next 10 years to absorb an extra 30 million tonnes of capacity planned by domestic and foreign steelmakers, industry officials and analysts said.

India's consumption of 35 kg per head is just a sixth of China's and compares to a world average of 160 kg, but it could rise quickly as more steel feeds a booming economy and infrastructure improvements.

South Korea's POSCO Ltd. and domestic leaders Steel Authority of India Ltd., Tata Steel Ltd. and Essar Steel Ltd. have all announced plans for new plants in India, Asia's fourth-largest economy.

"As a consumer, we're in a nascent stage. Once we wake up, consumption should grow to absorb the new capacities," said B.N. Singh, joint managing director of JSW Steel Ltd.

India produces 38 million tonnes of steel a year and the industry estimates that will rise to 70 million by 2015 as new plants start up, spurred by recent high steel prices and strong local demand.

POSCO, the world's fifth-largest steelmaker, plans to invest $12 billion in a new 12 million tonne plant in the eastern Indian state of Orissa.

The world's biggest producer, Mittal Steel, is looking at Jharkhand, an eastern state with abundant iron ore deposits, as a potential site for a new plant.

Industry officials expect steel demand to grow at least as fast as a forecast 7 percent annual economic growth in the next decade, fuelled in part by government plans to spend billion of dollars on new roads, bridges, ports, and power plants.

"Now there is a boom in infrastructure projects, building of houses and a lot of money is flowing in. A lot of steel will get pumped into these sectors as well," said T.K. Bandopadhyay, joint director general of Calcutta-based Institute for Steel Development Growth.

But some experts urge caution, saying many players may not survive the steel sector's extreme cycles.

"By the time many such projects reach maturity, investors may discover that all this investment was not worth it," said J. Mehra, a director at Essar Steel.

A recent downturn in prices has prompted major global steelmakers to cut back production to protect prices.

Mittal Steel said on Wednesday it would cut global output by 1 million tonnes in the third quarter to compensate for lower demand. Other European steelmakers, including Arcelor and ThyssenKrupp, had already announced cuts.

Analysts said the cuts showed steelmakers were more serious about protecting prices and margins than about preserving production volumes.

Steel prices jumped last year as China's economic boom sucked up raw materials worldwide, with prices peaking in the second half as clients built up stocks amid fears of a shortage.

Local firms Ispat Industries Ltd. and SAIL both announced price cuts on Friday due to rising inventory and easing global prices.

POSCO's entry into the Indian market has been criticised by local firms opposed to global majors exporting iron ore out of the country.

"Everyone is welcome to invest and contribute to the growth of the industry here," JSW Steel's Singh said. "But taking away our non-renewable resource should not be permitted."

India exports about 70 million tonnes of iron ore, mainly to China, and about 4.3 million tonnes of finished steel annually.

India is estimated to have proven iron ore reserves of about 13 billion tonnes, which could last 25 years even if the country used up 300 million tonnes per year.

State governments who control the massive iron ore and coal deposits are zealously courting foreign firms to extract them and employ more people and help pay for infrastructure.

"We missed the opportunity previously. Now the ball is in our court and we plan to fully take advantage of it by getting as many players as possible to fully tap the ore deposit," said A.K Singh, Jharkhand's top mines official.

Jharkhand government appeals for land for new industries

Hampered by the lack of land to set up new industries, the Jharkhand government has appealed to the people to donate land to set up land banks.

The notice urging donation of land has been pasted in collectorate offices in different districts. The government would pay the people for the land.

In the last four years, Jharkhand has signed memorandums of understanding (MoU) worth of Rs.650 billion with 32 companies for setting up industries.

Despite signing the MoUs, providing land remains a major problem for the state government.

Essar steel, which signed an MoU last year, has said if land is provided, the company will start production in two years.

"A dozen companies which signed a MoU with the government are waiting for land to set up industries," said an official

Essar, Ispat cut prices by 7-8%

Barely 24 hours after public sector behemoth SAIL cut its prices between Rs 500 and Rs 2,000, domestic steel firms Essar Steel and Ispat Industries today announced cut in their prices by 7-8% due to rising inventories owing to reduced global intake.

"Essar Steel has revised prices for its products in the domestic markets. The prices will be lower by approximately 5-8% and will come into force with immediate effect," an official said.

He said with the import duty now at 5%, domestic steel prices are in line with international rates. Therefore, any decrease or increase in prices are due to the international prices, he pointed out.

Ispat Industries also announced lowering of its steel prices by 7%, again due to rising inventories, company sources said.

Last evening, SAIL cut prices between Rs 500 and Rs 2,000 per tonne terming it a "temporary correction" owing to market fluctuations triggered partially by China's low intake of steel.

The cut, to be effective from today, was necessitated by the present demand and supply situation, besides lowering of global steel prices, a SAIL. spokesman had said.

However, SAIL is hopeful that within a month or two, global steel prices would stabilise and the market would again rejuvenate to allow prices to rise

Prices low as steel makers slash prices

Influenced by a cut in the prices by state-run Steel Authority of India Ltd. (SAIL), steel prices drifted in the wholesale steel and iron market on Friday and ended with fresh losses.

Arrivals and offtake, however, remained restricted due to paucity of funds.

Traders said announcement of a cut in steel prices in the range of Rs 500 to Rs 2000 per tonne by the SAIL mainly pulled down commodity prices in the market.

They said absence of buying by engineering units too had its shadow on the trading sentiments.

In the saria section, kamdhenu 8-mm, 10-mm, 12-mm, 16-20mm and 25-mm were down by Rs 200 each at Rs 27,000, Rs 26,600, Rs 26,200, rs 25,950 and Rs 26,500 per tonne respectively

Posco deal stirs trouble for Patnaik

The deal between South Korean steel major Posco and the Orissa government for a 12-million-tonne steel plant in the state has stirred trouble for Chief Minister Naveen Patnaik.

Besides opposition parties, some members of Patnaik's own Biju Janata Dal (BJD) and leaders of ruling coalition partner Bharatiya Janata Party (BJP) have openly objected to the way the deal was made.

"The proposed Posco plant is going to affect the domestic steel industry adversely," former union steel and mines minister and senior BJD leader Braja Kishor Tripathy told IANS.

"It wants to export iron ore from the state which will affect existing sponge iron industries and steel plants in Orissa as they will be starved of the ore," said Tripathy, a Lok Sabha member.

Tripathy is not alone. A weekly Oriya newspaper edited by BJD general secretary and state Panchayati Raj Minister Damodar Rout is also critical of the deal.

"The state bureaucracy has not taken adequate care to protect the interest of the state in the Posco deal," reported Sanchar daily in a front-paged article.

Patnaik is also facing criticism from the BJP. State Industry Minister Biswa Bhusan Harichandan here said the government signed the agreement without discussing the project in detail with him.

State BJP chief Jual Oram said the government had signed the deal hurriedly without taking care of the state's interests. "We are objecting to the government's permission to the steel major to swap 30 percent of iron ore," Oram told IANS.

The state signed a memorandum of understanding for India's largest direct investment with Posco, the world's fifth largest steel maker, June 22.

Posco will build a steel complex involving a 12-million tonne steel plant costing $9 billion, a 30 million tonne iron ore mine, a mill for hot-rolled coils near the port town of Paradeep in the coastal district of Jagatsinghpur and a seaport along the state's coast.

The state government has also granted Posco mining lease rights for 30 years to supply a total of 600 million tonnes of iron ore to the new plant.

"The state government should have asked Posco to do a joint venture with the state-run mining corporation," Oram said.

"The chief minister did not even take into confidence the three ministers belonging to BJP - who are in charge of transport, revenue, labour and industry - while finalising the deal," he said.

Besides political parties, the agreement has angered environmentalists who argue that more steel industries will bring more pollution to the state.

"It is going to bring more pollution than revenue to the state," secretary of the Wildlife Society of Orissa, Biswajit Mohanty, said

Indias Ecomonic Growth at 6.9% for 2004-05

India's economic growth stood at 6.9 per cent for the 2004-05 fiscal year as compared to 8.5 per cent during the previous financial year. The GDP growth rate during the last quarter of 2004-05 stood at 7 per cent as against 6.4 per cent during the third quarter of 2004-05, according to estimates released by the Central Statistical Organisation. The standout performer was the manufacturing sector, which enjoyed growth of 9.2 per cent

Going up on gas

I heard an interesting investment argument recently. India has a growing demand-supply gap in energy. Over the next five years, gas will be supplied from various sources. One possible source is commercial exploitation of the Krishna-Godavari basin off the East Coast

There will be imports via various terminals at Hazira, Dahej, Kochi, Mangalore etc. There may be cross-border imports from Myanmar and Iran. Companies like Gail, Reliance, Shell, Petronet, GSPC, Indraprastha Gas, Gujarat Gas etc, will be involved.

There are four major potential consumers. The largest is the power sector, which will double generation capacity by 2012. Generators like NTPC will be happy to switch to gas-based plants if assured of stable supply. The fertiliser industry will be another major consumer since it uses gas as feedstock.

The third consumer is the transport sector. Pressure from civil society will lead to conversion of urban public transport to gas. The fourth consumer is the housewife. As gas supply improves along with per capita income, more households will switch to gas.

As for the regulatory environment, its unclear. Gas prices will remain controlled until some undefined future. The draft gas policy recommends the appointment of an independent regulator. But there is no set timeframe and it would be optimistic to expect this to happen fast.

The draft also recommends Gail be split into two entities to minimise conflicts of interest caused by its monopoly position as transporter-cum-marketeer. Otherwise, Gail could hold every other player to ransom.

So the gas sector will see policy flux, price-control and the possible continuation of monopolies even as it sees capacity expansion involving huge investments. That makes the future profitability of producers, marketeers and transporters tough to judge

Nevertheless theres an investment opportunity in the transport infrastructure. Wherever its sourced at whatever price, gas must be delivered to consumers. That means at least 12,000 km of new pipelines costing about Rs 25,000 crore.

There are plans to build pipelines from Kakinada (AP) to Uran (Gujarat). The Hazira-Bijapur-Jagdhishpur line will be extended to Haldia with branches at Dadri, and Dahej and HBJ may eventually be connected to Myanmar through Bangladesh-Assam. There will be a Kochi-Coimbatore-Bangalore pipeline from ONGCs terminal in Kochi. Plus, there could be an Iran-Pakistan pipeline.

Somebody must supply those steel pipes. So, it can be argued that steel pipe manufacturers such as Maharastra Seamless, Jindal Saw etc, are guaranteed large orders from the gas sector. This will also ensure that the domestic steel industry stays buoyant over this period and thats useful, given the recent trend of softer steel prices.

Jindal Saw has a September year-ending. On the basis of the six-month performance of October04-March05, it will close 2004-05 with at least 70 per cent earnings growth.

On current price, the annualised PE is about 14. Jindal Saw has already exceeded its full-year 2003-04 turnover within the first half of 2004-05.

Maharashtra Seamless has seen 55 per cent rise in turnover to Rs 879 crore in 2004-05 coupled to an 18 per cent rise in PAT to Rs 85 crore. An equity expansion is on the cards in Maharastra Seamless.

Orissa may blacklist NGOs

Orissa government may blacklist select Non-Government Organisations (NGOs) in the state which are posing hurdles in the ongoing industrialisation process on the pretext of social and environmental issues

A confidential note prepared by the state home department has recommended debarring at least four NGOs that are perceived to be involved in anti-industry activities in tribal pockets

The NGOs on the firing line are the Rayagada-based Agragamee, Ankuran, Laxman Naik Society of Rural Development and Weaker Sections Integrated Development Agency

The home department's recommendation is based on information furnished by state intelligence officials

Sources said, similar action may be taken against some more NGOs soon which are opposed to the government's industrialisation programme.

The home department has recommended that the government stop all grants to these four NGOs and ask the Centre to cancel of their licenses under the Foreign Contribution Regulation Act.

It may be noted that eager to accelerate the process of industrialisation in the state, the government has signed 39 MoU for setting up of steel and aluminium/alumina sector in the past one year.

Some of the projects are in the remote tribal belts where the NGOs are mostly active. The state has lost few projects in the past to the protracted agitation by the tribals backed by the NGOs.

So in a pre-emptive action, the government has moved to ban those NGOs which are suspect to be anti-industry and instigating tribals against industrial houses, said a source

He added that the move is a confidence building measure by the government sending signals to the investors that the state is on their side in creating a conducive atmosphere for industrial activity.

From the above list, at least one of the NGOs-Agragamee was banned for two years from 1998 to 2000 for spearheading an agitation against Rs 4000 crore Utkal Alumina project of Indal at Kashipur in Rayagada district.

The project, conceived in 1995 had been hanging fire after massive tribal unrest and police firing. The work on it has started recently following the take over Indal by Hindalco.

Says Achyut Das, the chief Agragamee, "I am yet to get the details of the government move to ban our organization. I do know why the government is targeting us".

"In a civil society the people have every right to accept a project or reject it", he said, added that when Utakal Alumina at Kashipur has already started work, there was no reason for the government to take action against us.

Jagadananda, the head of another reputed NGO, CYSD, told Business Standard that it is unfair to brand NGOs as anti-development.

Castigating the government for any punitive action against the NGOs he said, there should not be any attempt to throttle the voice of difference in democracy.

He said, in many places in Orissa, the NGOs have played crucial role in peoples' development which otherwise would not have been possible only through government intervention.

Railways announces tariff discounts

The Indian Railways on Thursday announced tariff discounts for certain commodities moving in the under-utilised routes.

The discounts will also be extended to the incremental loading of those commodities.

The move is expected to benefit cement, iron and steel and petroleum companies, among others. Moreover, it has also increased the free time allotted to users during train loading and unloading by one to two hours depending on the type of wagon used.

A rebate of 20 per cent will accrue to those goods that are charged at class 140 or above when they are being transported on notified empty flow directions, said the Union Railway Minister, Lalu Prasad. This, however, excludes minerals, coal and raw materials being transported to steel plants.

Empty flow directions are those routes where wagons do not find return traffic load and thus do not earn the Railways any revenues.

"Rakes moving to the North East and East do not find return flow traffic," said an official.

Moreover, the same group of commodities has also been extended a 15 per cent rebate on the incremental loading during the lean period - from July 1 to September 30. Importantly, the rebate will be applicable only on that quantum of the commodity, which is over and above the 10 per cent increment level compared to the previous years' loading during the same period. The discount offered on incremental loading will encourage users to load more on Indian Railways.

Prasad made these announcements while inaugurating a seminar on `Dedicated Railway Freight Corridor' organised by the Associated Chambers of Commerce and Industry here. Another facility announced on Thursday allows users to load/unload on two points if they are not in a position to load/unload the entire rake.

The Minister also announced an increase in free time allotted for the loading and unloading of jumbo rakes from eight hours to nine hours. The free time allotted to users for unloading tank wagons has been increased from five hours to seven hours.

The free time has also been increased for mechanised unloading in open wagons from five hours to six hours. Two extra hours have been extended for additional shunting for moving and removing rakes on sidings, he added

Reforms good, but address social issues

India is now part of the global market and Indias technical talent is now respected everywhere. On its part, the Government of India has opened up the economy. With all this happening we should be talking about re-energising India by building on the momentum already generated. In either case, we are talking about leadership that enable us to do it, said Azim Premji, chairman, Wipro Corporation

He was addressing the CII meet on Re-energising India Inc Challenges here on Friday.

With 100 per cent FDI, telecom and insurance sector open for FDI and no discrimination by the government, India has become a preferred investment destination.

When all this is happening, quality, technology and cost-effectiveness drive short-term and medium-term advantages for the country. We must be aware that the long-term drivers will have a more profound impact on every facet, said Premji.

There are issues that have a far-reaching impact at the regional level, like priority to primary education. At Azim Premji Foundation, our key drive is towards universalising primary education.

We have 30 million children in the age group of 6-14 years who are out of school. Education helps people make informed choices and enhances their access to opportunities.

The second issue is primary healthcare. Our infant mortality rate is 70 per 1,000 compared to less than 10 per 1,000 in the developed world. This level of morbidity, combined with illiteracy, deprives millions of people to take advantage of the economic opportunities.

Third, there is a strong need to overhaul our land-related laws, taxation and information systems. It is estimated that 90 per cent of land in India are subject to legal disputes over their ownership.

Stamp duty ranges between 8-15 per cent of the property value, encouraging avoidance. All this has led to Indian land prices being the highest among the Asian nations relative to average incomes, and low tax collection is hampering our ability to maintain urban infrastructure.

Fourth, is the power situation. The power sector is by far the biggest resource drain on the economy. We need to eliminate power theft and leaks, and reduce the T & D loss. These changes can have a major impact on the fiscal deficit of the states, apart from bringing down the cost of doing business in India.

Fifth, water scarcity is being felt across the country. Less than 40 per cent of the cultivable land is under assured irrigation. The water table is declining at the rate of 5 per cent every year.

In the medium term, water shortage will create a significant barrier to growth of the economy. It is important that we push ahead with innovative projects like interlinking of rivers.

Without leadership or vision a company will hit the road block or may be doomed, said J J Irani, director, Tata Sons while recalling the experience of Tata Steel.

Tata Steel, most efficient steel maker in the world today, was written off in the early nineties and McKinsey even suggesting winding up the plant at Jamshedpur as steel making was a sunset industry.

Tata Steel then had a workforce of 78,000 producing only 2 million tonnes of steel. It was the costliest steel maker at $220 per tonne, while the worlds most successful company Posco did it at only $170 per tonne.

Under the stewardship of Irani a framework for modernisation was prepared, which included cutting the cost on raw material handling and the workforce by half over 10 years.

As part of the plan, we wanted to match Poscos efficiency. But in less than six years, we reduced the cost of production to $160 per tonne with a workforce of 40,000.

JSW embraces oracle E-Business for expansion plans

Jindal South West Steel Ltd on Thursday announced that with plans to expand its production capacity from 2.5mn to 4mn tons per annum with a planned investment of Rs12750mn it has implemented Oracle E-Business Suite 11i.10 to enhance its production capacity and drive expansion plans throughout its business.

JSW Steel went live in May 2005 on several Oracle E-Business Suite modules including Oracle Purchasing, Oracle Inventory, Oracle Financials and Oracle Project Costing. The Oracle E-Business Suite implementation will enable JSW

Steel to achieve integrated accounting, common business procurement practices, unified human resources management and effective project cost monitoring across its plant locations. The solution will ensure that JSW Steel has automated project cost monitoring abilities throughout the expansion phase.

"Since 1998, we have used Oracle Financials solutions to help us reduce accounting book closing time by more than 10%. This significant return on investment prompted us to choose Oracle over other vendors in order to ensure our success during this critical expansion phase across the company," said Mr. Seshagiri Rao Director of Finance, JSW Steel.

The battle for steel

The Orissa government's concessions to Korean steel major Posco has set the cat among the mice, as the skirmish for mining rights for iron-ore heats up.

Bhubaneswars imposing secretariat looked as though it was under siege. Gun-toting policemen scrutinised visitors before they were allowed in. The cops swooped down on over 200 protesters who were preparing to go on dharna

Special forces were moved in to the airport and in the hotel where the guests from Korea had arrived. Orissas dapper chief minister wasnt taking any chances with the 30-odd senior executives who had come from Posco, the Korean giant steel maker, to sign a controversial agreement with the state government after a year of hectic negotiations and stiff opposition from domestic steel makers and political parties.

Posco, of course, is offering attractive goodies. In what is the largest foreign direct investment in the country, it will fork out over Rs 50,000 crore to set up a staggering 12 million tonne steel plant in the state.

Orissas minister of steel and mines, Padmanabh Behera, is tom-tomming other benefits: the state will get a revenue of Rs 700-800 crore annually from the project. Besides, it will employ 48,000 people directly and indirectly.

And the central government will earn an additional Rs 89,000 crore in tax revenue over the next three decades

But it has also been able to muscle in equally attractive concessions which are in the eye of the storm: Posco can export 30 per cent of the 600 million tonne iron ore reserve which it has earmarked for its plants in Korea.

Says an agitated Moosa Raza, president of India Steel Alliance, which represents the countrys leading steel makers: This is blatant discrimination. We are giving away scarce resources to foreigners so they can make steel cheaply, while we are being denied the same resource. Its xenophobia.

But Posco top brass is asking for public support and promises dramatic changes. We will develop Paradip port in the same way as the company had changed the face of Pohang in Korea, says the India head of the Posco project, Tae-Hyun Jeong

But that isnt likely to keep political parties asking for Naveen Patnaiks scalp quiet. Points out CPI leader A B Bardan: Its nothing but unrestrained plunder of ore.

Bardan is pushing for an all-party meeting to chalk out the next course of opposition. And in a memorandum written to Prime Minster Manmohan Singh by Left leaders, Bardan has accused him of losing over Rs 96,000 crore in the deal. How? Patnaik could have asked Posco to buy iron from the marketplace, he says

But why are domestic steel makers up in arms? The reason is their desperate search for control over iron-ore leases, which constitutes 30 per cent of the cost of making steel. Its assured availability and control over the price is key for steel companies to remain in business.

But Posco, which has been promised large mining reserves not just for captive use but also for exports, has caused panic among existing steel makers because it means less iron-ore available for them.

Other proposed projects too have come under scrutiny. The countrys steel makers have voiced their displeasure about a proposal by the Lakshmi Mittal group to set up an eight-10 million-tonne plant in Jharkand.

Says a senior executive of a steel company: They will use Posco as a precedent to export iron ore for their own plants across the globe.

The gold rush for iron-ore follows its insatiable demand in China. Prices of iron-ore went up three-fold in the last 12 months. In India, most steel makers including Essar, Ispat, Jindal (controlling between them about 60 per cent of the production) do not have captive mines on lease.

They depend entirely on iron-ore available at market prices either through imports or from state-owned mining companies. With iron-ore prices on an upswing, they are desperately seeking mining leases without which they could well become unviable.

(While the market price for iron-ore has hit Rs 2,500-Rs 2,600 a tonne, the cost of extracting it from a captive mine is a mere fifth of that cost.)

State governments in Orissa, Jharkhand and Chattisgarh are offering mining leases but on one condition: The companies must put in greenfield steel plants in the state, and the iron ore cannot be taken out for steel plants in other states.

The Jindal group, for instance, has a proposal for a 5 million tonne steel plant in West Bengal with the mining facility in Jharkand. The project got blocked because Jharkand is willing to give mining rights only if the steel plant is also located in the state.

Most private steel makers are located in consuming states (Essar in Gujarat, Jindal in Karnataka, Ispat Maharashtra). Even so, they have signed agreements for new steel plants in these states for access to iron ore mines in the long term

But a big deal like Posco could dramatically change the scenario. Domestic steel makers allege that with the Koreans being assured iron-ore, there might not be enough mines left in Orissa for domestic steel makers, as reserves are limited.

Or, they might get iron-ore mines located in the deep forests which would be difficult to mine. Says a worried Jitendra Mehra, director in the Essar group: The Posco deal will crowd out Indian steel makers from the market.

State government officials insist the fear is unwarranted, that they have enough iron-ore for the 36 companies that have signed MoUs with the Orissa government to set up steel plants and that they will all get mining leases for 25 years.

Says steel and mines minister Padmanabh Behera, No project for which an MoU has been signed is going to suffer. We have free ore reserves of 2 billion tonnes, and of the 2.8 billion tonnes already pledged to various parties, a sizeable portion is with state-owned Orissa Mining Corporation (OMC) which can supply ore to different industries.

The domestic steel makers claim thats bunkum. If all the proposed steel plants come, they will produce about 45 million tonnes of steel, and that would require over 2.1 billion tonnes of iron-ore reserves for 30 years. But the state has free reserves of only 1.8 billion. So, obviously, some will be deprived of ore, says a senior executive of a leading steel company.

Argues Vishambar Saran, chairman, Visa Steel, which has a proposal to set up a 1.5 million tonne plant in Orissa: All that we are looking for is a level playing field.

What is the discrimination domestic steel makers are agitating over? Essars Mehra points out that in the case of Posco, they will begin with a 3 million tonne steel plant in the first phase, though the Orissa government is offering it iron-ore mining capacity to support a 6 million tonne plant.

Whats more, Posco is aware of the ore-fields allocated to it. Laments Mehra: We have to order 20 per cent of our capital equipment and 50 per cent of our civil and structural works upfront before the state government even entertains our mining leases, and we still dont know which ore-field we will get.

But what has come under more serious fire is allowing Posco to export iron-ore. Domestic steel makers say the Korean company was also looking at Brazil as an alternative to India to set up a steel plant, but was snubbed there in being refused captive mines.

Worse, Indian exports of iron-ore have gone up in the last few years (jumping dramatically from 25 per cent of the countrys production in 2000-1 to a staggering 52 per cent in 2003-4). So, the time might not be far when the country becomes a net importer of iron-ore.

Says Tata Steel managing director B Muthuraman: We are against export of iron ore. The existing reserve will not last more than 30-40 years at the expected levels of consumption.

Muthuraman argues that unlike other countries such as Brazil or Iran (which export iron ore), there is a large and growing demand for domestic steel, and per capita consumption is likely to go up. Ergo, iron ore is needed for domestic consumption, rather than exports.

The second point is whether Indian steel makers can convert iron-ore into steel at internationally competitive prices. The answer, Muthuraman says, is yes.

In fact, several countries are conserving their own reserves of iron-ore and importing it from other countries. Says Sanjay Sagar, chief-corporate coordinator in JSW Group (formerly Jindal): China is conserving its iron for the future, but we are frittering it away through export.

To add to their concerns, Posco has promised that it will import iron-ore from Brazil equivalent to the amount it exports from India. The reason: Indian iron ore has high alumina content, and Posco is used to better quality ore.

Behera justifies the state governments decision: According to geological studies, Indian ore has relatively high alumina content. But the swapping of ore allowed to Posco is optional. If the company finds the ore available in Orissa suitable, it may not export at all. Adds Poscos Jeong: Iron-ore found in Orissa was high in alumina content, and the reason for importing ore from Brazil was to produce high-grade quality steel.


But domestic steel makers say the real reason lies elsewhere, that it hopes to export Indian ore to substantially reduce the cost of producing steel in its plants in Korea.

How is it that the iron-ore, which they say is of low quality, is good for their Korean operations and not for India? asks Raza. There seems to be no logic in their spending huge freight costs and bringing ore from Brazil.

So, is there is a way out of the impasse? Steel companies are pinning their hopes on a new mining policy that will address the issues of a level playing field, a cap on iron exports, and treating iron-ore as a national resource so steel plants in other states are not denied raw material leases.

But with the Posco deal through, other international steel companies will look to the precedent. Clearly, there are more battles lined up in the the furnace.

In favour of Posco?
Or why domestic steel makers feel discriminated against
The time-frame for implementation of the Posco project is (i) commissioning by July 2010 or 36 months from the date of taking title to and possession of land; (ii) registration of the executed prospecting licence, whichever is later.

For other MoUs, the time frame is 36 months from the signing of the MoU and not the handing over of the land.


The government has promised to give a prospecting licence to Posco before the allotment of the mining lease on fulfillment of certain milestones.

Theres no mention of a prospective licence in the MoUs with other companies. The prospecting licence, according to the MMRD rule, gives a right on property before the allotment of the actual lease

Posco has been assured of SEZ status.
No such promise has been made to other companies in their MoUs

There is a detailed list of infrastructure facilities required to be developed for the Posco project in the MoU, which includes construction of rail and road links and port development.

Other MoUs are silent on infrastructure facilities to be made available to the companies.

The government has promised to set up a dedicated high-power committee comprising of senior government officers and company representatives to pilot the Posco project. Similarly, it has pledged to constitute a special, single-window clearance committee and appoint a nodal officer to pilot the project

Such priorities have not been given to other companies in the MoUs signed with them

IRON-ORE sweepstakes

India has 6.9 billion tonnes of proven iron reserves, 3.4 billion tonnes of probable reserves, and 3.2 billion tonnes of possible reserves. Steel production is currently at 35 million tonnes, but is expected to hit 100 million tonnes by 2020, and 200 million tonnes by 2030.

Indias export of iron-ore has gone up from 25 per cent of the total production in 2000-1 to 52 per cent in 2003-4.

Given 100 million tonnes of steel production and no export of iron-ore, high and medium grade iron-ore reserves should last for 25 years. But at that level of production and export, the reserves will remain for only 12.5 years.

With 200 million tonnes of steel production and no export of iron-ore, the reserves will last for 12.5 years. But with 200 million tonnes of steel production and the present level of export of iron-ore, the reserves wont last beyond 10.5 years