Kolkata-based Shyam Steel Industries has announced the takeover of majority shares in Beekay Steel, which owns a medium scale steel plant in Barbil, Orissa,
Through this acquisition, Shyam Steel expects to get a foothold in Orissa’s steel sector as Beekay Steel has a standing MoU with the state government for production of 0.28 million tonne of steel per annum at its present facility.
Shyam Steel management declined to disclose the acquisition cost though they shared the plans for future expansion of the newly acquired plant.
“Shyam Steel expects to invest Rs 365 crore in the Barbil plant by 2012 with a 40 MW captive power plant, capacity expansion of DRI (sponge iron) to 0.1 million tonne, and Billet to 0.1 million tonne along with establishment of a coal washery”, said Lalit Beriwala, director, Shyam Steel Industries.
He said, the plant hopes to get its iron ore from a captive mine that belonged to Beekay Steel earlier under an MOU it had signed with the Orissa government in 2005.
Apart from this acquisition, Shyam Steel has lined up Rs 1,000 crore investment for a 2 million-tonne beneficiation and pelletisation plant in Sundergarh of Orissa. The plant will have a 50 MW captive power plant. The TOR (Term of Reference) from MOEF (Ministry of Environment and Forests) has been issued and this project has got a go ahead from the Single Window Authority of the Orissa government.
The construction work on the project will start as soon as the MoEF clearance is obtained.
Beriwala said, one of the problems faced by the steel companies in Orissa is the regular supply of iron ore. It takes 30 days for lifting of iron ore which includes 20 days for private mine owners to get permission from the Deputy Director of Mines to release iron ore to the steel companies, who are required to make advance payments to private mines while the approval process is going on.
“These results in loss of time, capital remaining blocked for a considerable period as well as a huge loss due to interest accruing on such blocked capital”, he added.
Shyam Steel has urged the state government to consider a proposal for allotment of large iron ore mine to consortium of companies by forming a Joint venture Company (JVC)/ Special Purpose Vehicle (SPV), where the allocatee end users hold equity stake proportionate to their share in iron ore production from the mine. The JVC/SPV mining company after mining the iron ore shall transfer it to the mine allocatees for their captive end use plant only.
This proposal is similar to the guideline issued by Ministry of Coal (MoC) on joint allocation of coal block to a consortium of companies. Such a JV/SPV could atleast meet 50 percent of the iron ore needs of steel companies in the state providing them some relief and strengthening their confidence on the state government.