(From right) Mittal Steel chairman L.N. Mittal, Jharkhand chief minister Arjun Munda and Jharkhand chief secretary P.P. Sharma in Ranchi on Saturday. Picture by Prashant Mitra

Ranchi, Oct. 8: The wait is over. Mittal Steel, the world’s largest steel producer, today signed a memorandum of understanding with the Jharkhand government to set up a 12-million tonne steel plant at an estimated investment of Rs 40,000 crore.

This will be the second largest foreign direct investment (FDI) in the country after Korean steel maker Posco in Orissa.

The MoU was signed by Mittal Steel chairman Laxmi Niwas Mittal and Jharkhand chief secretary P. P. Sharma, in presence of chief minister Arjun Munda at his residence.

Besides the steel plant, according to the agreement, Mittal Steel will build a captive power plant of 2500 mega watt, a township and related infrastructure. It also emphasises the development of the state’s human resources by improving the polytechnics ' in the same way as mentioned in the deals signed by the Tata Group a month ago.

Munda expressed happiness that the agreement was signed on the state’s terms.

“He (Mittal) worked keeping in mind the sentiment of Jharkhand,” Munda said referring to the social commitments made by the steel baron.

The implementation of this mega project will, however, hinge on the crucial issue of iron ore linkage that the Jharkhand government has agreed to provide. The state has agreed to recommend 600 million tonnes of iron ore reserves for the first 30 years and another 400 million tonnes for the next 20 years.

Mittal, who is known for mega acquisitions around the world, is making a departure from his usual practice and setting up a greenfield project because he is keen to have an access to the ore.

When asked about what prompted him to come to Jharkhand, Mittal said, “With its abundant mineral deposits, the state has given him the opportunity to come back to the country where I belong to.” Mittal Steel has plants and operations in 14 countries across the globe.

The detailed project report (DPR) will be ready in 18 months from now. After this, the company may take another four years to complete the first phase, which envisages production of 6 million tonnes of steel. The remaining 6-million tonne capacity will be built in the second phase that may take another 54 months.

Talking to media after the signing ceremony Aditya Mittal, president and group chief financial officer of Mittal Steel, said the new plant would be developed by a wholly-owned subsidiary of the parent company.

Commenting on the location of the proposed plant, he avoided any straight-forward answer by saying, “It has to be close to both the market and the mines. The infrastructure must also support to ship out the production.” It could be mentioned that the MoU also entails development of roads connecting the project to the nearest highway.

On the spate of investment in the steel sector in the country, L.N. Mittal said, “The country will need close to 100 million tonnes steel by 2020 if the demand has to match the production then. Hopefully, there will not be any oversupply situation then.”

Mittal Steel will manufacture both long and flat products. And its investment will also entail a 500-mega watt waste heat recovery power plant for captive consumption, over and above the 2,500 mw plant for which it has agreed to do a feasibility report.