Operation of JSPL steel mill hinges on raw material linkage

The Naveen Jindal owned Jindal Steel and Power, which is in advanced stage of commissioning two million tonne steel-making capacity at Angul, faces an uncertain raw material environment threatening to impede the operationalisation of the plant.

In fact, various units of the plant, which will produce two million steel through DRI route, are already ready, but the plant is not being commissioned because of fear of sustaining the operation in the absence of any raw material security, said a source.

The company, till date, has invested about Rs 21,000 crore on the project and lined up an additional investment of Rs 17,000 crore for the balance four million tonne steel capacity in the second phase to reach the final project capacity of six million tonne.

Besides, it plans to expand the capacity of its pellet plant at Barbil to nine mtpa at an estimated cost of Rs 2,000 crore.

In toto, the steel maker needs 325 million tonne iron ore in the next 25 years to operationalise its six mtpa steel mill and pellet plant.

As per the memorandum of understanding (MoU), the state government had agreed to assist JSPL in making a firm arrangement with Odisha Mining Corporation (OMC) along with other private iron ore lessees to meet a substantial portion of the requirement of iron ore of suitable grade for initial period of steel making.

“The company has filed applications for grant of PL (prospecting license) as well as ML (mining lease) over iron ore bearing areas in the state long time back. Still, no mines have been allotted to JSPL for captive use to make these plants operational,” said Subrat Ratho, head of the company’s Odisha operation and managing director, Jindal Synfuels Ltd, a JSPL subsidiary.

Besides iron ore, JSPL also faces hurdle in feeding its 810 Mw captive power plant (CPP). The company has been allotted Utkal B1 coal block at Angul, for which it had obtained environment clearance in 2007 and forest clearance in 2010. The prospecting of the coal block has been completed and grant order of mining lease (ML) has been issued in 2011. However, execution of ML deed is still pending with the state government since 2011. In the absence of assured raw material linkages, JSPL fears that it may not be able to run its plants at full potential, a situation that may impact thousands of livelihoods and dent the state’s investment climate. However, Ratho denies the possibility of JSPL investment in Odisha going the Vedanta way. “We are optimistic on government support. It is our constant endeavour to procure as much of our raw material requirements as possible through captive mines and long-term linkages. We hope we will be successful in our endeavours in keeping with our MoU with the Odisha government andour investments in the state,” said Ratho who also heads the mining business at JSPL.