JSW rethink on Bengal steel & power project

The coking coal mine was meant for the steel plant and the non-coking coal was for the captive power plant

JSW Steel's Bengal project, its single largest proposed investment, is in jeopardy.

"The project is on hold," Group Chairman Sajjan Jindal said on Sunday, on the sidelines of an event.

The latest blow is the Supreme Court's cancellation of three coal blocks allotted for it. The Rs 35,000-crore steel and power project, at Salboni in Paschim Medinipur, was allocated two non-coking and one coking coal mine, through the state dispensation route. Iron ore had been a bone of contention from the beginning but it was one of the few projects of its size to bag three coal mines.

"Without any of the key raw materials (iron ore and coal), it would be difficult to do the project," said Jindal. Would he proceed if the company won mines in the coming auction and go ahead with the power project? "We will have to look at it afresh. It's a bit messy and complicated," he said.

The complication he meant was the power purchase agreements, terminated by the state government. According to that arrangement, 60 per cent of the power was to be bought by state power utilities.

The coking coal mine was meant for the steel plant and the non-coking coal was for the captive power plant. Any surplus power, according to the agreement, had to be sold to the West Bengal State Electricity Board.

Iron ore problems have prompted JSW Steel to construct a slurry pipeline for its Vijaynagar (Bellary in Karnataka) plant, at a cost of Rs 2,000 crore. The pipeline will transport ore from its Jaigad port near Goa to Bellary.

"We don't have captive iron ore or coal. Hence, we are looking for alternatives. The payback time for the slurry pipeline is one year," said Jindal. The Vijaynagar plant has capacity of a little more than 10 million tonnes a year. It is to be expanded to 20 mt by 2022. Iron ore concerns have led JSW Steel to import the raw material. This year, its ore import will be around 10 mt, half its total requirement.

Can the slurry pipeline be replicated for the Bengal project? "Unfortunately, we are not replicating this model," he said.

So far, JSW Steel has invested around Rs 700 crore in the Salboni project. It was bagged by the Left Front-led West Bengal government in 2007 but many hurdles came in its way, the greater part under the current (after 2911) regime. Jindal says, without going into specifics, "There were problems from Day-1."

Source:Business standard