Calcutta, July 27: Bengals ill luck hung heavy like a bad taste in the mouth when Sajjan Jindal today ushered in the biggest foreign direct investment yet in metal in the country.
Japans JFE Steel will pick up a nearly 15 per cent stake in Jindals JSW Steel for Rs 4,800-5,000 crore but the milestone also served to highlight how the Salboni project in Bengal has slipped into the sideline and is about to miss a deadline.
We intend to start construction by the end of this fiscal (March 2011). It will take three years from then to complete the first phase and start production, Jindal said from Mumbai, responding to a question by The Telegraph.
He was referring to the 10-million-tonne steel plant JSW Steel is expected to build in West Midnapores Salboni.
The timetable set by Jindal today means the project is expected to start production at least three years later than originally scheduled. When JSW signed the agreement with the Bengal government in January 2007, the target for commencing production of 3 million tonnes of steel in Phase I was 2011. Now production is slated to begin in 2014.
A scaledown also seems to have taken place. Jindal said a 300MW power plant would be built in the first phase. However, the plan earlier was for an 800MW power plant in the first round and another of matching capacity in the second leg. Company officials said environment clearance had been secured for only 300MW in the first phase.
Jindal and the state government did maintain the timeline more or less till the groundbreaking ceremony took place at Salboni on November 2, 2008.
But a Maoist bombing that day set the stage for tumult in Bengal. The bomb targeting chief minister Buddhadeb Bhattacharjee exploded in front of Jindals convoy, triggering the events that led to the Lalgarh insurgency and deployment of central forces.
The Salboni project ran into rough weather also because of the global financial crisis. India waded out faster than the rest of the world one of the reasons JFE invested in an Indian company.
Jindal said the Bengal project topped JFEs agenda when the companies began talks last year. But JFE decided to invest in the holding company, JSW Steel, as it wanted to wrap up the deal quickly.
We are still in discussion with JFE for their participation in the Salboni project, Jindal said. The Bengal project of Rs 35,000 crore is being executed by JSW Bengal, in which JSW Steel has around 94 per cent stake.
Biswadip Gupta, the CEO of JSW Bengal, said the funds from JFE would indirectly benefit the local project. It will help the parent company to shed debt. Consequently, it will be easier for JSW Bengal to raise fresh loans from banks to execute the Salboni plant.
The Salboni project is one of the few mega steel projects to have land, coking and thermal coal mines, water allocation, environment clearance and special economic zone status. Still, the timeline keeps getting stretched.
Some feel the Maoist insurgency could be a factor but not the only one. Jindal said: Its a worry (the local condition), the safety of our people. But the project site is not affected.
The political instability in the state has not helped either. If construction starts next year, it will coincide with the Assembly election that is expected to result in a change of guard. All these factors have taken away the state governments bargaining power. It cannot force an investor to stick to deadlines now, said an industrialist from Mumbai.