NMDC approves demerging steel plant as Baghel protests ‘privatisation’
State-owned NMDC said on Friday its board had approved a proposal to demerge NMDC Iron & Steel Plant (NISP) in Chhattisgarh’s Nagarnar.
The board met has given its in-principle approval to demerge NISP, said the company, which is India’s largest iron ore producer, on Friday. The 3 million tonne (mt) plant is the only greenfield project scheduled for commissioning—a plan held up due to the Covid-19 pandemic, said sources.
“There are two major problems–one is, lack of workers to complete the project and the other is European technology partners are finding it difficult to travel in the wake of Covid-19,” sources said.
Sources said the demerger could be a precursor to disinvestment. Chief Minister Bhupesh Baghel this wrote to Prime Minister Narendra Modi against privatising the steel plant, which was constructed at a cost of over Rs 20,000 crore. According to a report by news agency PTI, Baghel said privatisation would hurt the hopes of tribal people.
An ICICI Securities report has said if pursued in a time bound manner, the demerger could create avenues for fund raising for the central government.
The report also said that the in-principle approval to demerge, i.e. creating a separate listed company eventually with a shareholding akin to NMDC would be value accretive to minority shareholders.
“All incremental capex for the steel plant can be self-funded by the demerged entity and improve return ratios of the mining entity substantially; allow investors a better pure play mining opportunity,” it added.
The NMDC stock was up by 12.50 per cent on BSE at Rs 108 on Friday.
Sources said one of the company’s mines were linked to the steel project. NMDC produces about 35 million tonnes of iron ore from its Bailadila deposits in Chhattisgarh and Donimalai in Karnataka.
In the past, mega greenfield steel projects by Tata Steel and Essar Steel in Chhattsgarh, have tripped, either due to land woes or mine linkages. But that has been the scenario for most greenfield projects in India.
Between 2004-2006, companies signed several agreements to set up greenfield projects to add more than a 100 million tonnes capacity. Most of them never took off and in the past decade, more than 60 per cent capacity addition has been through brownfield expansion.
Though land acquisition for the NMDC project started sometime in early 2000, the steelmaking technology for the proposed plant was changed, and it was in 2011 that it signed a contract for blast furnace.
