RINL privatisation prompts Posco to explore new locations for steel plant

Andhra govt has invited Posco to set up a unit at Krishnapatnam, but steel major has not taken a decision yet

The central government’s decision to privatise Rashtriya Ispat Nigam Ltd (RINL) has prompted South Korean steel major Posco to explore new locations for setting up a steel plant.

Sources close to the development said that with the government deciding to privatise RINL, Posco was facing yet another barrier. “Posco has been exploring investment in India like other global steelmakers ArcelorMittal, but it has not made any progress,” they said.

Now, the Andhra Pradesh government has invited Posco to set up a plant in Krishnapatnam, but no decision has been made by the steel major. “Posco is also exploring other locations,” indicated sources.

For almost 16 years, Posco has been trying to set up a steel plant in India. It had signed a memorandum of understanding (MoU) to set up a 12 million tonne plant in Jagatsinghpur district in Odisha. But land woes and a change in mining policy derailed its plans.

Last year, however, Posco’s plans appeared to be making some headway as talks with RINL were held for investment on its land, facilitated by the ministry of steel. But with the Centre deciding to privatize RINL, it’s back to square one for the global steelmaker.

On February 3, secretary, DIPAM, tweeted that the CCEA (Cabinet Committee on Economic Affairs) on January 27 had given an in-principle approval for 100 per cent strategic disinvestment in RINL along with management control by way of privatization.

Employees’ unions, however, have been agitating against privatization of RINL. The Andhra Pradesh government, too, asked for reconsideration of the decision.

In February, Andhra Pradesh chief minister, Y S Jagan Mohan Reddy, had written to Prime Minister, Narendra Modi, to reconsider disinvestment plans of RINL Vishakhapatnam and explore other opportunities to put the plant back on track. The suggestions included allotment of captive iron ore mines and financial restructuring.

However, sources in RINL indicated that privatisation plans were on track.

For Posco, it would mean another wait for setting up a steel plant. In the first phase, Posco is eyeing a steel plant capacity of 4 million tonnes.

Posco had signed an MoU in 2005 with the Odisha government for a mega steel plant. But till 2013, the state government had managed to transfer a part of the land requirement. Then in 2015, the Centre changed the mining laws, which made it mandatory for companies to go through the auction route for captive mines as opposed to an earlier nomination route. The same year, Posco suspended its project in Odisha due to the lack of progress.

Delays in land acquisition and mine allocation had stalled other projects, too, like ArcelorMittal’s. The world’s leading steelmaker had signed an MoUs for setting up mega steel plants in Jharkhand and Odisha in 2005 and 2006, respectively. However, none of the projects took off. Finally, it made a major entry into India in December 2019 with the acquisition of Essar Steel under the insolvency law.

Stressed assets have been generating interest from investors with the upturn in steel market. According to an ICICI Securities report, the current spreads for Indian players have crossed CY09 highs.

Timeline

2005: Posco signs MoU for $12 billion steel project in Odisha

2015: Posco suspends project over delays

2020: Joint working group with Posco and RINL representatives to implement MoU for steel plant

2021: CCEA gives in-principle approval for 100 per cent strategic disinvestment in RINL; Posco explores new locations for plant