Kudremukh may defer Rs 225-crore spread

Kudremukh Iron Ore Company (KIOCL), the public sector undertaking under the ministry of steel and mines, is reconsidering its proposal to set up a 100,000-tonne a year ductile iron spun pipe (DISP) plant at an estimated cost of Rs 225 crore at Mangalore in Karnataka.

The company’s board, which had shortlisted two global bidders including a consortium led by Larsen & Toubro, is likely to meet this week-end or early next week to take a final call on the matter, K Ranganath, chairman-cum-managing director, KIOCL said.

“Given the present economic slowdown in the country, we are currently rethinking on our investment programme. The matter is before the company’s board and a decision will be taken whether to go ahead with the DISP plant immediately or defer it to a future date. If the board decides to implement it immediately, the issue of funding will have to be decided,” he told Business Standard. KIOCL, as of March 31, 2008, has a cash reserve of Rs 1,468 crore.

KIOCL, which exports iron ore pellets and concentrate, had planned to build DISP plant adjacent to its existing pig iron plant in Mangalore on the western coast. The proposed plant will utilise the superior quality pig iron having low phosphorus and low sulphur — both being produced by the company.

Ductile iron spun pipes are used in most of the advanced and developing countries because of its superiority over cast iron spun pipes. Even in India, there is a huge demand for spun pipes from various state governments and urban development bodies. They are used in irrigation projects, drinking water supply and sewerage projects, and other large infrastructure projects.

In April this year, KIOCL had floated global tenders for the project. Out of five international bidders, who had expressed interest to implement the proposed plant, two were shortlisted. This included a Larsen & Toubro-led consortium with China’s Dalian Wanton Industrial Equipment Company and Chennai-based Sigma Minmet which had formed a JV with two other Chinese firms, China National Metal Products and Xing Xing China.

However, it is learnt that the company has already rejected L&T’s bid on some commercial terms. L&T had asked for an extended period of 24 months to complete the project as against 20 months specified by KIOCL. This leaves Sigma Minmet-led consortium as the lone contender, which has agreed to all the conditions of KIOCL to implement this project. Currently, the KIOCL board is negotiating the final price, sources said.

Though Ranganath refused to give details of the price quoted by Sigma Minmet, the bidder is said to have quoted Rs 350 crore to construct the DISP plant, which is 55 per cent higher than KIOCL’s expectations. The company has asked Sigma to bring down the cost and final price negotiations are expected to be held next week, the source said.