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Steel ministry wants to put off the sale of NMDC's Chhattisgarh steel plant

Oct 1,2019

The Union steel ministry has called for deferring the proposed sale of NMDC’s Nagarnar Steel Plant in Chhattisgarh until the plant is commissioned, citing the huge investments involved and sensitivities of the Maoists-affected Bastar district where it is being built.

 

Any move to divest the plant at this juncture would adversely impact the plant’s completion, the ministry said in a letter to the Department of Investment and Public Asset Management (Dipam).

 

The Nagarnar plant was among a number of state-run companies the government had identified for strategic disinvestment. The cash-rich NMDC Ltd, formerly National Mineral Development Corporation, however, is opposed to the idea of a demerger and disinvestment of the plant.

 

So is the Congress government in Chhattisgarh. “Whether it is Nagarnar or (Steel Authority of India’s) Bhilai, we are opposed to disinvestment of PSUs,” chief minister Bhupesh Baghel said. “These were established by the Congress to help in nation-building.”

 

NMDC has invested Rs 15,937 crore up to August end in the three million tonnes per annum plant and is expected to spend another Rs 7,203 crore over the next 8-9 months. The plant is expected to be commissioned by June 2020.

 

With plans to increase its iron ore capacity from current 43 million tonnes per annum to 67 million tonnes per annum by 2025, NMDC believes its cash flow and capex plans for acquiring new mines are linked to Nagarnar plant’s future. Its ability to retain mining leases — four of which with a combined capacity of 26 million tonnes per annum are set to expire in 2020 — and to develop new greenfield mines could be affected with the demerger or disinvestment of Nagarnar plant, NDMC told the steel ministry.

 

After the 2015 amendment to the Mines and Mineral (Development and Regulation) Act, auction of mines fetches state governments revenue as a percentage of the sale value of the mineral, in addition to royalty and taxes. When reserving or extending a lease to a PSU, states could forgo this additional income. NMDC is locked in a dispute with the BJP government in Karnataka over an extension of its Donimalai lease. In 2017, however, three of its leases in then BJP-ruled Chhattisgarh were granted 20- years extension.

 

Baghel said the previous government’s decision to reserve deposits for PSUs and then call in a private MDO (mine developer and operator) as had happened for coal blocks had hurt the state’s earnings. He said the state stands to lose Rs 9 lakh crore in revenue in coal over the next 30 years.

 

Baghel said, “However, we also do not think it is intelligent to burden a PSU (like NMDC) with a heavy premium that makes it impossible for it to operate.” Some of NMDC’s mining leases in the will expire in March next year.

 

Congress has wrested the Dantewada Lok Sabha seat from BJP in a recent poll, completing its hold of the Bastar region.

 

In 2008, Tata Steel had set out to build a steel plant in the state but failed to win local support for the project that was to come up at about 20 km from Nagarnar. Among the first decisions, Baghel took after assuming office in December last year was to return this land to its original owners, mostly tribal farmers.

 

Also, his government was forced to order a halt to work on a Greenfield mine (Deposit 13) being developed in Dantewada in June, following massive local protests.

 

Nagarnar plant is a 51:49 joint venture between NMDC and Chhattisgarh Mineral Development Corporation that has hired Adani Enterprises as a mining contractor. The joint venture also holds rights to the Deposit 4 mine that is linked to the plant.