| Building blocks
New Delhi, July 28: The government has given SAIL the green signal to buy Neelachal Ispat, the Orissa pig iron plant that has been set up by metal trading giant MMTC.
A committee of secretaries has cleared the proposal to buy MMTC’s 51 per cent stake. This was followed up by an inter-ministry meeting at Udyog Bhawan, where it was decided that a merchant banker will fix the “fair value of the plant”.
SAIL has promised to turn Neelachal into an integrated steel plant that will convert the pig iron it makes into finished high-grade steel. It will also expand capacity.
Though SAIL officials would not say how much they would pay for the plant or what their investment would be after the acquisition, analysts feel the steel major would pump in close to Rs 2,000 crore in the first year itself.
SAIL’s bid for Neelachal was mired in a controversy with the commerce ministry, which owns MMTC, resisting the move. However, with the committee of secretaries breaking the deadlock, the sale is now “in the pipeline.”
Rules for such purchases were relaxed recently. Now, SAIL need not need to go to the cabinet for approval to buy out Neelachal. Sources said the Orissa government, which owns a minority stake, was willing to sell its shares to SAIL. The state stands to gain by getting the steel major to run a second plant in the state.
Its Rourkela steel plant, one of the largest employers in Orissa, is the focal point in the rich industrial belt teeming with ancillary industries. The PSU steel major has said Neelachal will be developed like an industrial hub.
Neelachal Ispat, which owns a lucrative iron ore mining block in Orissa, has attracted several suitors in the past, including Vizag steel and the Tatas. However, it was SAIL that appears to have stolen a march over others.
The government wants SAIL to merge all state-run iron and steel units into itself to create a monolith of global scale. SAIL has already merged IISCO and chalked out a rapid modernisation plan for the Burnpur steel maker. There are also plans on the anvil for SAIL to take over Vizag steel plant, also known as Rashtriya Ispat Nigam.
If the final jewel in the crown ' Vizag ' falls into SAIL’s lap, the steel-maker will easily come within the ranks of the top 10 steel makers in the world by production volume.