Steel consortium to chalk out plans to fund Afghan project

The consortium, led by SAIL, had bagged the mining rights for three iron ore mines in Hajigak in November.

The heads of seven domestic steel makers will meet next week to chalk out ways to fund the $10.8 billion Hajigak project in Afghanistan before discussing the financing issue threadbare with Kabul at a later date.

The consortium, led by state-owned Steel Authority of India Ltd (SAIL), had bagged the mining rights for three iron ore mines in Hajigak in November. It plans to invest $10.8 billion over 8-10 years to develop the mines as well as set up a 6.12 million tonnes per annum steel plant and a 800-MW power plant.

"Consortium leader SAIL has convened a meeting of the CEOs of member companies on March 20, ahead of the meeting with Ministry of Mines in Kabul to discuss the financing issues of the project," a consortium member told PTI.

The meeting among the member companies, including three public and four private sector firms, assumes significance as this would help the Afghan-bound delegation to portray the most crucial aspect of the project during its visit, likely to take place sometime between April and May. The future of the project hinges on ensuring the Afghan government the ways and means of assured funding by the Indian consortium.

The consortium had earlier sought state funding, but the chance of getting such a convenient and an easy source is out of question at the moment as India does not have such mechanism and there is no proposal to create one like that of China to the cash-starved government.

Further delay in assuring the Afghan government of the funding of the project may also prove costly for the Indian steel makers which are looking for securing raw material assets outside the country and grabbing the opportunities to cater to the growing steel demand in the war-ravaged nation.

The consortium had been finalising the documentation since long back and the assured source of funding for the project would be instrumental for inking the final documents with the Afghan government for taking the project ahead. The project, however, would be built over a period of ten years and thus, the entire funding of the project is not required at one go.

The Hajigak deposit has a resource base of approximately 1.8 billion tonnes with 62 per cent iron content. The Indian consortium proposes to fund $75 million for prospecting and geological exploration of the mine.

Public sector firms NMDC and RINL hold 18 per cent in the consortium while private sector firms JSW Steel and Jindal Steel and Power have 16 per cent each. JSW Ispat Steel, now merged with JSW Steel and Monnet Ispat and Energy hold eight per cent and four per cent stake, respectively. SAIL holds 20 per cent stake in the consortium.