Daitari: A Complex Story

What would have been Asias biggest steel complex is now a graveyard of hopes

Walking through the nondescript, anonymous little village of Daitari in Orissa, suddenly one stumbles upon a small marble plaque etched with the words Dedicated to the memory of Ambika Paul. The plaque is flanked by a foundation stone and a small podium and encircled by three Kadamba trees. A lone gardener, deputed by the state-owned Industrial Promotion and Investment Corporation (Ipicol), stands guard over the site. The inhabitants of Daitari tell you that the plaque and the foundation stone were laid in 1971 by NRI industrialist Swraj Paul. The promoter of the Caparo empire wanted to set up the 3-million tonne, Rs 6,000-crore Kalinga steel plant in Orissa in memory of a daughter who died young. Kalinga Steel never saw the light of day. But it set a precedent for half-a-dozen other steel plants.

 

A cluster of seven steel plants spread over an area of 22,000 acres with a combined capacity of nearly 8 million tonnes of steel and at a projected outlay of over Rs 15,000 crore was to transform the iron-rich village of Daitari into Asias largest steel complex. But seven years later, Daitari is home to two incomplete steel plants, while five projects remain on the drawing board. S D Misra, chief secretary, Orissa government gives an unsatisfactory explanation for the failure of the Daitari steel complex: Most mega projects are slow to take off. Land acquisition, statutory clearances, tying up finances etc takes time.

The Daitari steel complex was part of a bigger plan, conceived by the late Biju Patnaik, which was to turn Orissa into the steel capital of India. Biju Patnaik was not the first politician to use steel as a popular slogan during election campaigns. Every now and then, the people of Orissa are promised a second steel plant, similar to SAILs Rourkela plant in the state. The peoples fancy for steel plants becomes understandable when you consider that Orissa alone has 26 per cent of the countrys iron ore reserves, amounting to 2,700 million tonnes of iron ore deposit. Besides, other ingredients for steel manufacturing such as limestone, chromide, dolomite, manganese quartz, coal and water are also abundant in the state. Above all, to those ignorant of modern day automation, Rourkela gives the impression that a steel plant always opens up employment opportunities.

Even as Orissa waits for the second steel plant to come up in the state, Biju Patnaiks successor J B Patnaik has promised to line up as many as 15 steel projects of various sizes for investment in the state during his tenure. Besides the seven that are to come up in Daitari, the other projects include a mega 10-million tonne shore based Tisco facility and a six million tonne Larsen and Toubro plant in the port town of Gopalpur and smaller plants such as Orind Steel, Asian Alloys and Jindal Strips in towns of Nayagarh, Bileipada and Angul in district Keonjhar (see table).

The Tisco plant, the most prominent of the 15, is still at the stage of land acquisition. Tisco managing director J J Irani says categorically: Unless work on port and railway lines starts, we cannot build the plant. Tisco has decided to go slow on the project because the work on the upgradation of Gopalpur from a minor to major port and the laying of rail lines between Daitari and Banspani a 154 km link vital for the transportation of the ore has still not taken off. Adds Romesh Kataria, vice-president of Mideast (India) Limited, the Mesco Group company which is putting up the 700,000 tonne pig iron plant Mideast Integrated Steel Limited (MISL) at Daitari, In the absence of the Daitari-Banspani rail line, we have to transport raw material using 450 trucks a day. And the road to the plant is not good enough to handle this kind of traffic.

Successive state governments have failed to fulfil their infrastructural commitments in Orissa. After Biju Patnaik rode to power as the head of a Janata Dal government in 1990, he promised to provide facilities such as developed land, water and power connection, rail and road links and effluent disposal line to the projects in Daitari at a reasonable cost. To fund this programme, the government even raised Rs 130 crore from the market through the issue of steel bonds in 1994.

But with the proposed complex proving to be a non starter, a substantial chunk of the bond money has now been diverted as loans to various loss-making PSUs and cash-strapped private companies which plan steel projects in the region. For instance, the government has given Rs 48 crore to the public sector company Nilachal Ispat Nigam which is setting up a one million tonne mild steel project and Rs 17 crore to the Mesco Group.

Mesco and Nilachal Ispat are the only two companies whose projects are under implementation and they dont miss an opportunity to draw attention to this: Says Subrat Roy, managing director Nilachal Steel, The steel industry is a highly specialised field. It is not for any Tom, Dick and Harry to dabble in it only because he happens to have some capital to invest. But with both Nilachal and Mesco already two years behind schedule, one can only guess when their work will finally come to fruition. Says Rita Singh, promoter of the Mesco group, Of all the plants coming up in the state, ours is the only plant which is moving towards completion, and therefore, we are taking up all the initial local problems and facing the brunt.

Incidentally, after Swraj Pauls Kalyan Steel plant was shot down by financial institutions in 1992 due to an unacceptable debt equity ratio of 1:4, Mesco purchased the land and announced the setting up of the 2.5 million tonne Mesco Kalinga Steel Limited (MKSL). With the projects cost escalating from 1,300 crore to Rs 2,500-crore during the delay, FIs refused to sanction loans for a new project and MKSL has been temporarily shelved. New Delhi-based Ganapati Steel and Bhushan Steel and Strips Ltd, which had proposed 2.5 million tonne and 1.2 million tonne projects respectively, have closed their offices.

While the government is getting flak for not delivering on its promises, sceptics are also questioning the intentions and credibility of the business community. Says an official of Ipicon, Most investors only seem to be interested in grabbing the land at concessional rates, and block mines on the plea of captive mining. Sources say the government has allotted 14,000 acres of land to eight companies; all have defaulted in the payment of instalments towards the land price.

Roy of Nilachal Ispat suggests that the government constitute a high level body of technical experts to screen the entrepreneurs and examine the viability of the project at the proposal stage. Otherwise, the scepticism expressed over these ventures would only send wrong signals to the genuine investor in the state. The state government, however, seems resigned to facing more embarrassments in the future. Minister of Industries Niranjan Patnaik says, We knew that all the 15 steel plants which were proposed in the state were not going to come up. But even if a few big ones materialise, that will change the face of Orissa.