The decision also involves building of a slurry pipeline of about Rs 2,500 crore for transporting raw material to the steel plant, which is located little over 400 kms away from the upcoming port.
Jindal Group signed and the Andhra Pradesh government signed an agreement called memorandum of understanding (MoU) in Davos, Switzerland, on Wednesday for the proposed project. The company will invest in building a couple of jetties at Ramayapatnam to receive iron ore shipments from Australia.
A senior Jindal group official said the company considered the idea of importing iron ore for a long time, as the Bellary plant’s capacity will be expanded to 18 million tonne from the present 12 million tonne level in the next 4-5 years.
Bellary is the hub of Karnataka’s iron ore industry, but Jindal was forced to import the raw material because of the production cap of 34 million tonne imposed by the Supreme Court. Higher domestic iron ore prices would make a perfect sense to import the raw material to meet the growing requirements.
By the time it achieved the intended capacity, Jindal would be requiring close to 40 million tonnes of iron ore only for its Vijayanagar steel plant, more than the existing iron ore production cap in Karnataka.
" Investments in a slurry pipeline can be recovered within two-three years as road and rail transport is too expensive. It is also quite difficult to find enough railway wagons when you need,' the official said adding that the quality of imported iron ore is also higher compared to the raw material available in domestic mines. The project is expected to be completed in 3-4 years.
It is not the first time that a steel company is planning to build a slurry pipeline to carry the raw material through pipes at such a distance. The public sector iron ore miner NMDC is building a similar slurry pipeline project to supply iron ore to the Vizag Steel Plant in Visakhapatnam from Nagarnar in Chhattishgarh covering a distance of little under 300 kms.