Tata Steel fears that it may have to start its 3-million-tonne Kalinganagar steel plant without a captive iron ore mine, since the state has not taken any initiative as yet to allot it a mine.
Anand Sen Tata Steel?s vice-president for quality management and in-charge of Kalinga Nagar project told FE the company would need 4.8 million tonne of iron ore per annum to run its 3 mtpa plant and by this time the government should have allotted the mines.
?We decided to set up the plant in Orissa considering availability of iron ore and promises of captive mines. But it seems that we will not get a mine here and we will have to source iron ore from the open market,? Sen said. He said the captive iron reserves that Tata Steel has barely supports its Jamshedpur plant.
?If we have to buy iron ore and run our plant cost of manufacturing steel at Kalinga Nagar will at least be 65% more than the cost at which we produce in Jamshedpur,? Sen said.
He said the plant would be commissioned by the middle of 2014 calendar year. While 70% of the foundation work was complete, orders for 60% of the procurement have been placed.
Sen said there was no way that Tata Steel could further delay the project. Of the estimated Rs 35,000-crore investments, the company has already spent above R20,000 crore. There is already a cost overrun for the delay, which the company is at present assessing. The project has considerable forex exposure, which has mounted pressure on Tata Steel?s finances for the falling rupee. Debt costs are also high. So it is not possible for Tata Steel to keep the investment blocked without commissioning the plant for commercial operation, Sen said.
Orissa steel and mines minister, Rajani Kanta Singh said the state government has constituted a cabinet sub-committee under the chairmanship of state finance minister, Prasanna Acharya, to recommend the government on distribution of raw materials to user industries in the state.
Sen said it takes 7-8 years to develop a mine. If the government decides that it would be the nodal agency to supply raw material to industries than it will immediately have to start developing a number of new mines and make formidable investment, a steel and mines department official added.
