Naxal violence can cast shadow over Essar Steel bid

Essar Steel was among the initial companies that had been put up for sale under the insolvency proceedings

Naxal violence in Chhattisgarh could have a severe impact on the acquisition of debt-laden Essar Steel Ltd’s Hazira plant located in Gujarat.

Essar Steel, promoted by Ruias, was among the initial companies that had been put up for sale under the insolvency proceedings. Apart from the Hazira plant, Essar Steel operates a number of downstream facilities that include beneficiation plant in Chhattisgarh.

The 8 million tonnes per annum (mtpa) plant is located in Bailadila of Dantewada district, which is infamous across the globe for deadly Naxal violence. In 2005, Essar Steel built a 267-km slurry pipeline, reportedly world’s second largest, to carry iron ore slurry from Dantewada to the company’s Visakhapatnam pellet plant.

The 8-mtpa iron ore pellet plant in Visakhapatnam feeds the pellet requirements at the Hazira plant.

The operation of a slurry pipeline has been a major challenge for the company as it passes through the Naxal stronghold pockets that rebels claim to be their “liberated zone”. According to Chhattisgarh police’s record, Naxalites had damaged the pipeline over 20 times between 2005 and 2010 that disrupted operational for about 250 days.'
 

Since then it has never been available for continuous usage, which has led to frequent disruptions in steel production at the Essar Steel Hazira plant. A senior executive of the company was booked in connection with the alleged payout to extremists in 2011 and the legal battle is on in the court of law.

“It is not easy to operate the pipeline as either the Naxalites will damage it or the mischievous villagers in their pretext to extort money from the company,” Bhawarlal Bothra, former Bastar Chamber of Commerce and Industry President, said. Patrolling the vast pipeline is also a big challenge as handful security personnel would be vulnerable to the Maoists in the densely forested area, he added.

When contacted, Essar Steel spokesperson said the company had been facing the challenge in the area.

Among those eyeing to buy Essar Steel, Tata Steel has a firsthand experience of dealing with the Naxal challenge. The company had to drop its Bastar steel plan. Following Naxal terror, the state government failed to acquire land for Tata Steel that had proposed to set up a 5.5 mtpa integrated steel plant in Bastar.