Ore clouds Jindal kick-off

SAMBIT SAHA

Calcutta, Jan. 5: The corruption paranoia, blamed for the policy paralysis at the Centre, is threatening to take a toll on Bengal by clouding the timetable of the much-delayed Jindal steel plant at Salboni.

Banks and financial institutions are unwilling to give loans to the project because of uncertainties surrounding the mining sector. The Jindal project may require loans totalling Rs 10,000 crore in the first phase to build a 3-million-tonne plant.

The proposed Salboni plant will be fully dependent on mines outside Bengal to source iron ore, the basic raw material for steel. However, the prospects of committed supply have dried up after the Odisha government clamped down on mining in the wake of a scandal over illegal extraction and the Supreme Court regulated the process in scam-scarred Karnataka.

The JSW Group has sought the Bengal government's help to secure iron-ore linkages with public sector units like the NMDC and the Orissa Mineral Development Corporation (OMDC).

However, sources said the state government "at this point of time" was waiting to see the implementation of the first phase before taking a proactive role in securing such long-term contracts for ore.

Sajjan Jindal, the chairman of the JSW Group, is likely to visit Calcutta next week and meet chief minister Mamata Banerjee and industries minister Partha Chatterjee.

The curbs in Karnataka have hit the Jindals' profitability, too, making banks take a harder look. In such an environment, the Jindals may not be too keen to press for immediate start of work at Salboni.

The mining crisis has hit the Salboni project at a time the Mamata government has unravelled red tape — born out of archaic land laws in Bengal — around the West Midnapore site.

"We are ready from our side. It is now up to them (the Jindals) when they want to start work. They have some issues relating to raw material but they have to deal with the Centre for that," Chatterjee said.

Iron ore and coal are the most crucial raw materials for steel-making. The erstwhile Left government, much to the heartburn of other aspirants, had given the Jindals three coalmines to build the steel plant and a power project.

But Bengal does not have an iron ore mine. The Jindals had shelved their Bengal plan in 2005 when Jharkhand refused to give ore despite the then government taking the issue up with the Prime Minister.

The Jindals eventually got around the problem. They sealed the agreement in Bengal in 2007 after signing up five private miners from Odisha's Keonjhar for ore supply. The Salboni project needs 8 million tonnes of ore in the initial phase.

But the Karnataka mining scandal, which eventually dislodged chief minister B.S. Yeddyurappa, prompted the Supreme Court to prescribe a stringent monitoring regimen that affected supply.

By then, the Odisha government had tightened the screws in response to the scandal there. Out of the 600 mines in Odisha, only 118 are operating now. A decision on renewing the leases of 209 mines is expected by the month-end.

Sources said Jindal's company had written to the NMDC, a central PSU, for a long-term contract — the next best option in the absence of a mine of its own.

But the NMDC has so far declined to make a firm commitment, citing distance from its Chhattisgarh mine. Another mine is expected to be opened in Jharkhand but not before three to four years.

"It was not possible to give them a firm commitment. It is a joint venture with the Jharkhand government. How can we commit now on behalf of the JV? Even then, you never know what the policy would be, going forward. Look at what is happening in Odisha now," an NMDC official said.

One way out will be to involve the West Bengal Mineral Development and Trading Corporation, a PSU that can apply for an iron ore mine anywhere in the country and then allow the private investor to use the ore. However, even if the government clears such a plan, it will take time.

Jindal's company may tomorrow sign with Bengal the lease agreement for 3,800 acres of vested land.

The company needs to sign a separate pact for 189 acres with the WBIDC, which has sought a commitment on when work can start. Access to ore and funding is crucial to such a commitment.

ADDITIONAL REPORTING BY ASHUTOSH MISHRA