Essar Steel in a tight spot over 1,000 acres of unused land at Paradip

The company was to set up a six-million-tonne greenfield steel mill there

Still in the throes of an insolvency resolution, Essar Steel is in a tight spot for failing to develop over 1,000 acres of land at Paradip (Odisha) where it initially proposed a six million tonne greenfield steel mill.

To facilitate the setting up of the steel plant, the Odisha government through its agency for land acquisition- Odisha Industrial Infrastructure Development Corporation (Idco) had acquired 1,262 acres of land, of which 1,123 acres were private and around 100 acres were government-owned. The acquired land was alloted to Essar Steel with pointed riders. The company was to commence civil work in six months and start commercial production of steel within three years. 

Idco's letter to Essar Steel in January 2015, reviewed by Business Standard, shows the government agency alloted a parcel of 676.61 acres of acquired private land to the steel company after the latter paid Rs 116.27 crore. The letter mandated that the land would revert to Idco free from all encumbrances should Essar Steel fail to start civil construction within six months and commence commercial steel production in three years from taking possession of land. Also, Essar Steel was restrained from transferring its right or title in land either partially or fully including change in the constitution of the company without prior approval of Idco.

With Essar Steel turning bankrupt and its case referred to the National Company Law Tribunal (NCLT) for insolvency resolution, the matter of unused land has stuck out like a sore thumb. ArcelorMittal's resolution plan for Essar Steel though approved by the committee of creditors has been legally contested by its operational creditors including Standard Chartered Bank.

An Odisha government source said, “We are closely watching the insolvency resolution process of Essar Steel. After the company wriggles out of bankruptcy, the land can be transferred to the new promoters with a nominal transfer fee”.

The state government had previously asked Essar Steel about its plan to utilise the surplus land.

When contacted by mail, an Essar Steel spokesperson said, “We have not received any letter from the Odisha government on taking back land un-utilized by Essar Steel at Paradip. Also, we cannot comment on setting up the steel plant at this stage until the successful resolution applicant takes over”.

Essar Steel had deposited around Rs 200 crore with the authorities as land cost, assuming an average acquisition cost of Rs 15 lakh per acre. The company failed to install the steel plant as promised in a memorandum of understanding (MoU) signed with the Odisha government in 2005. Instead, Essar Steel set up a pellet complex, at Paradip, barely utilising 200 acres of land. The six million tonne pellet plant is backed by 12 million tonne benefication plant at Dabuna (Keonjhar), both facilities connected by a slurry pipeline. 

The steel maker emerged the successful bidder and has been awarded the letter of intent for the Ghoraburhani-Sagasahi iron ore mine auctioned by Odisha. The mine lease is spread over 139.2 hectares and endowed with 99.59 million tonne iron ore deposits.