Odisha appears to be jinxed for British Indian steel tycoons. Twenty years before ArcelorMittal pulled out from its 12-million tonne steel project in the state, the Caparo group of Swraj Paul had faced a similar experience. Paul had come to Odisha in 1992 at the invitation of the then Chief Minister Biju Patnaik to set up a three million tonne steel plant. But owing to delays in land acquisition, differences with the state government over technology and machinery and financing issues, he finally scrapped the plan.
The difference is that Paul's entry came at a time when Odisha, which has one-third of the country's iron ore reserves, was craving for a second steel plant - after the one built by public sector Steel Authority of India Ltd at Rourkela in the early sixties. By the time Mittal arrived, the state had already signed memorandums of understanding (MoUs) with 43 players, including Posco, Tata Steel, Sterlite, Jindal, Bhushan and Essar for mega steel projects with annual capacities varying from 3 to 12 million tonne .
So, will the ArcelorMittal pull-out impact investment flows to the state, which has become a favoured destination for many investors from within the country and abroad? As a senior state industry department official pointed out, after the Caparo Group's Kalinganagar project was scrapped, the state had to wait nearly a decade before investors came in hordes at the turn of century to set up steel plants to tap the world metal market boom. But the exit of ArcelorMittal is unlikely to translate into an investment drought because the state's hands are already full with proposals and MoUs that are waiting to get off the ground.
Over the last decade, the state has signed 50 MoUs for projects with a combined worth of Rs 1.98 lakh crore and planned steel capacity of 83 million tonne. ArcelorMittal's departure reduces those numbers by Rs 40,000 crore and 12 million tonne respectively.
Like ArcelorMittal, which had invested very little in the preparatory work for the project, most of the companies with signed MoUs may be feeling equally frustrated with the slow pace of land acquisition and inadequate government support on other project-related issues like raw material linkage and statutory clearances. But they do not have the luxury of walking out because they have either invested substantially or progressed some distance. These companies have collectively invested Rs 91,656 crore (only in the steel sector) to date, locking them into their respective projects. Of the 50 MoUs, 30 have gone into partial production, boosting the state's annual steel capacity by about 13 million tonne.
Among the biggies, Bhushan Power & Steel Ltd has sunk in Rs 25,000 crore to build a 2.4-million tonne per annum steel mill and 248 Mw captive power plant (CPP) at Sambalpur. Its sibling firm, Bhushan Steel Ltd, has invested Rs 21,817 crore to operationalise a three mtpa integrated steel plant at Meramundali, near Dhenkanal. The company plans to double the capacity to six million tonne by the end of 2013 at an additional investment of Rs 13,183 crore.
Tata Steel's six million tonne (Rs 40,000 crore) project at Kalinganagar, its first integrated greenfield steel venture outside Jamshedpur in the last hundred years, is progressing fast. Nearly half the construction is over and the first module of three million tonne is set to go on stream by September, 2014.
Jindal Steel and Power Ltd hopes to achieve two million tonne steel capacity at Angul with the commissioning of its DRI and coal gasification plants by September 2013. The company aims to commission the full six million tonne capacity by December 2015.
The other major players to have begun operation is Jindal Stainless Ltd, which has invested Rs 6,771 crore in its Odisha project. The company is operating a 1.6 million tonne steel plant, 1.6 million tonne hot rolled coil unit and 253 Mw CPP at Kalinganagar.
Even Posco's beleaguered Odisha project, which has been facing local protests over land acquisition for the past eight years, seems to be scaling the obstacles with the Odisha government announcing the completion of the acquisition of 2,700 acres required for the first phase for an 8 million tonne steel capacity. The company, which has already invested about Rs 300 crore in pre-project stage, is waiting for the Green Tribunal's nod to start construction work.
If all these projects go into full production as anticipated in the next few years, Odisha could still become one of the top industrialised states, even without ArcelorMittal.
Interestingly, though none of these promoters have anything complimentary to say about the state government. They all walked in a decade back enticed by the government's promise to allocate them mines if they put up plants that would add value. But the courtship lasted only as far as signing the MoU. They had to deal with problems of land acquisition in their own ingenious way and are now running from pillar to post to get a mining lease. So much so, that Essar Steel and Bhushan Power and Steel have recently approached the Supreme Court seeking direction to the state to allot them mines after investing substantially in the projects.
"It is not government support, but our sheer patience and perseverance that has kept us afloat in the state," says an industrialist requesting anonymity. His argument is partially corroborated when state Chief Secretary J K Mohapatra said setting up an industry is a "collaborative effort" to highlight the lack of effort by ArcelorMittal to take forward its project in the state.
Ironically, though steel promoters point out the exit of ArcelorMittal emphasises the "problem of doing business in Odisha", they are also happy with the development. R K Panda, an industry analyst, says, "If all the proposed steel plants actually materialise, the state does not have enough iron ore to feed them." As he pointed out when ArcelorMittal came in, marking the 44th MoU in the steel sector, the state was already in deficit by over 500 million tonne in ore requirement. And ArcelorMittal's project would have pushed the deficit to over a billion tonne. "The scrapping of the project has enhanced the chances of other steel mills to get raw material linkages. This way, ArcelorMittal's departure may, at best, strike out a big name from the state government's investment propaganda list, but have no real impact on the ongoing industrialisation," he added.
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