Tata Steel is holding back planned investments in a downstream steel cluster proposed in the vicinity of its greenfield steel plant at Kalinganagar (Odisha). The state government had identified 400 acres for the downstream park to tap into investments by such units in crude and stainless steel.
The steel maker's decision to defer commitments on the downstream complex around Kalinganagar stems from the recent acquisitions of Bhushan Steel Ltd (BSL) and speciality steel producer Usha Martin Ltd.
“We believe equations could change considerably after the two acquisitions, especially BSL which has proven presence in downstream business. BSL is a known supplier to auto OEMs and we can leverage its strengths. Besides, BSL plant is strategically located and offers us synergy benefits. Given BSL's solid presence, we are rethinking investments on downstream plans for Kalinganagar. Some of our Group companies had shown interest to invest but the plans are now on hold”, said a Tata Steel source.
For Tata Steel, the BSL acquisition promises to reinforce its market position in the automobile segment apart from consolidation of its status in the eastern region. A major producer of flat steel products, BSL has been a long-term supplier to auto OEMs (original equipment manufacturers) like Maruti Suzuki, Tata Motors and Honda Cars. On its own, Tata Steel is surging ahead in the automotive steel segment, powered by the recent commercialisation of hot rolled coils at its Kalinganagar facility. This project is also adding a cold rolling mill expected to go on stream over the next three years and firm up the company’s strength in auto grade steel.
In September last year, the Odisha government has held talks with about 70 steel downstream companies, soliciting their investments. The meet at Kalinganagar in Jajpur district, was attended by several ancillary firms from Odisha as well as states like Jharkhand, West Bengal, Andhra Pradesh, Kerala and Maharashtra.
A few Tata Group companies such as Tinplate Company of India Ltd and Jamipol and others like BMW Industries had shown interest to put up facilities at the downstream park. The state government is also learnt to have initiated discussions with a few more steel downstream players.
Ancillary and downstream industries in metals such as steel and aluminium, is listed as one of the six focus sectors by the state government in its Industrial Policy Resolution (IPR), 2015. Despite accounting for around 20 per cent of the country’s crude steel output and leading others in stainless steel production, there is scarcely any downstream steel activity in the state. Odisha is home to leading steel makers like Tata Steel, Jindal Steel & Power Ltd (JSPL), Bhushan Steel and Jindal Stainless to name a few manufacturers. Downstream steel parks are expected to provide impetus to value addition besides boosting steel consumption in the state. Although Odisha produces nearly 22 million tonnes of steel each year, hardly 10 per cent is consumed within the state due to lack of demand.
A report by leading consultancy KPMG has pegged the investment at Rs 12 billion on infrastructure development to develop a full-fledged ecosystem for downstream steel industries. It has suggested establishment of six downstream steel parks at Jharsuguda, Rourkela, Barbil, Paradip, Sambalpur and Dhenkanal for greater value addition of steel within the state with supplies of molten material from the mother plants.