Differences ironed out, Rs 5,000 cr SAIL-ArcelorMittal JV may take off soon

Deal for setting up an automotive steel unit, signed in 2015, was held up over revenue share formula

Steel Authority of India (SAIL) is hoping to soon conclude a joint venture (JV) agreement with ArcelorMittal, the Luxembourg-headquartered multinational entity.

"A joint task force is working on it and I am hopeful it will be soon," said P K Singh, chairman of the government-owned entity.

In 2015, SAIL had signed a memorandum with ArcelorMittal for setting up an automotive steel manufacturing facility, as a JV in in India. The investment indication was about Rs 5,000 crore.

The feasibility study was supposed to take around two years. Some commercial terms, especially the revenue share formula, is said to have kept the project from taking off. Singh seemed confident that the differences would be sorted.

SAIL had also signed a pact with Kobe Steel in 2012 for an iron nugget making plant but that has been a non-starter. Asked about that, Singh said, "It was in a preliminary stage. We are just now concluding our expansion, a huge investment. It is in the process of stabilisation and we will achieve full capacity in the next one to two years. Once that is over, we will move very fast."

Over the next one to two years, SAIL will achieve a finished steel capacity of 21 million tonnes a year, from the present one of 12.4 mt. The investment in modernisation and expansion is nearly Rs 70,000 crore.

Singh said the right ingredients were in place to make SAIL competitive. Discussions were taking place with Indian and foreign companies for special grade steel and special products.

"To remain competitive, these things are required," he said. In 2015-16, the company's value added production as a percentage of saleable steel was 41.5 per cent. After the modernisation and expansion, this would cross 50 per cent.

The government-owned entity still sells a significant component of its volume in semi-finished form, currently about a fourth. After the modernisation, and addition of new products, it is to come down to 12 per cent.

Singh said the defence sector was an exciting area that SAIL could work on. "It requires an advanced grade of steel. This benefit should come to us. But, it would be premature to talk about this."