State-owned steel firms - KIOCL, NMDC and RINL - have decided to set up 13 million tonne per annum (mtpa) slurry pipeline between Nagarnar and Vizag for carrying iron ore with Rs 3,500 crore investment.
They have already inked an MoU for setting up a joint venture in which Kudremukh Iron Ore Company (KIOCL) will hold 48 per cent stake, a source in the Steel Ministry said.
NMDC, country's largest iron ore miner, and steel-maker Rashtriya Ispat Nigam Ltd will hold 26 per cent each.
The companies may rope in an international technology/ equity partner to join the project at a later stage.
"All the parties agreed to develop the pipeline project in the JV with shareholding of 48:26:26 by KIOCL, RINL and NMDC, respectively. They will have the option to bring in an international technology and or equity partner to join the project at an appropriate time," said the source.
The slurry pipeline will be used to transport iron ore fines from NMDC's Bailadila mine in Chhattisgarh to Vizag in Andhra Pradesh, where RINL has its lone steel-making facility.
A 6 mtpa pellet plant will also be set up by the partners in Vizag. Pellets are key raw materials for sponge iron, a key input for steel-making.
A techno-feasibility report will ascertain the project cost, which is initially expected to be around Rs 3,500 crore, the source said. It will be shared by the parties in proportion of their shareholding.
NMDC will facilitate land, infrastructure and the required approvals for the project.
"The parties have also agreed that NMDC will supply the input material to the JV company as per a long-term supply pact to be entered between NMDC and JVC. The JVC shall have arm length relationship with KIOCL, NMDC and RINL," said the source.
The JV will offer finished products to KIOCL, RINL and NMDC as per their shareholding, and the parties can use them for its captive consumption or free trade by the firm.
The transportation of fines through the pipeline will reduce RINL's dependence on rail. RINL uses NMDC's ore for making steel. The usage of pellets will also help RINL improve productivity of its blast furnace, and reduce its coke consumption.
Besides, the pipeline will help NMDC resolve evacuation problems, and KIOCL - pellet maker - to enhance its 7.5 mpta capacity and grow businesses.
The MoU will be valid for two years and the companies will have the option to extend it.