NMDC to set up Rs 25K cr proj in K'taka with Russia's Severstal

The country's biggest iron ore miner NMDC today said it will parter with Russia's largest steel maker Severstal for setting up a 5 million tonnes steel plant in Karnataka.

The proposed plant will entail an investment of about Rs 25,000 crore. Both the companies will formally ink the pact for the project tomorrow.

"The proposed plant will be set up in Karnataka. We expect to commission 2 million tonnes per annum (MTPA) plant in the first phase and ramp up capacity to 5 MTPA later," NMDC Chairman Rana Som told PTI.

According to sources, both the companies may have 50 per cent stake in the JV. For the project NMDC has sought 2,500 acres of land from the Karnataka government, they added.

A Steel Ministry official said although the initial agreement between NMDC and Severstal would be signed tomorrow, modalities of the JV would be decided later.

Severstal will share its latest steel-making technology with NMDC for the venture, which will produce auto grade and electrical steel to meet its rising demand in the country, Som said.

The Russian firm is said to be among the top global steel ventures possessing expertise in producing specialised steel.

Severstal, as per media reports, seeks to expand to India and South-East Asian economies to tap the growing markets.

The proposed Karnataka plant will be NMDC's second in India as it has already started work on its 3 MTPA project in Chhattisgarh entailing an investment of about Rs 15,000 crore.

At present the Navratna firm produces about 30 MTPA of iron ore from 3 fully mechanised mines in Chhattisgarh and Karnataka.

The Karnataka steel project assumes significance in the wake of rising demand for steel amidst foreign investments worth thousands of crores of rupees pending in the steel sector due to land acquisition and other problems.

The domestic steel industry, which has an investment of about Rs 11 lakh crore in the pipeline, faces multiple challenges like green clearances and tribal protests. Delays in allocation of iron ore and coal mines to feed different projects are other stumbling blocks faced by the sector.

Global majors like ArcelorMittal and Posco have been facing land acquisition and other regulatory hurdles to start their projects, which entail an investment of an estimated Rs 1.5 lakh crore.

World's largest steel maker ArcelorMittal had entered into an pact with Jharkhand government in 2005 and a year later with the Orissa government to set up plants of 12 MTPA each at a total investment of about Rs 1 lakh crore.

South Korean Posco had entered into an agreement with Orissa in 2005 for setting up a 12 MTPA plant, but is facing problems in land acquisition. The Rs 54,000 crore project, billed as the single largest FDI in the country.

The steel ministry envisages a production capacity of about 120 million tonnes per annum by 2012, an ambitious target considering the present capacity of about 72 million tonnes only. Further it targets to achieve a production capacity of 240 million tonnes by 2020.