State-run Metals and Minerals Trading Corporation of India (MMTC) said that it would invest around Rs22,000 crore in its joint venture unit, the steel manufacturing facility of Neelachal Ispat Nigam (NINl)
“In order to ramp up capacity of Odisha-based Neelachal Ispat Nigam (NINl), around Rs22,000 crore will be invested in phases,” Ved Prakash, Chairman and Managing Director (CMD) of MMTC, the principal promoter of the project said.
“The steel capacity would be increased in two phases. In the first phase, the steel capacity would be doubled from 1.1 million tonne per annum to 2.2 million tonne per annum by 2018 at an investment of Rs 6,000 crore. In the next phase, the capacity would be further enhanced from 2.2 million tonne per annum to 5 million tonne per annum at a total cost of Rs16,000 crore by 2022,” Prakash said. NINl, one of the largest producer and exporter of pig iron in the country and a joint venture steel company promoted by MMTC ltd and the Government of Odisha with 1.1 million tonne annual capacity, will restart steel making operation from October 15 this year.
The steel mill, located at Duburi in Jajpur district, had halted steel making activity last year because of unfavourable market conditions. “With recent increase in import duty on various steel products and imposition of safeguard duty, there has been positive impact on the steel prices,” added Prakash.
The NINl board has already approved a proposal to expand the capacity of the plant from 1.1 million tonne at present, to 5 million tonne in two phases. “The first phase upgradation to cost about Rs6,000 crore, will take the capacity to 2.2 million tonne, while the phase-II work comprising attaining of the final objective of 5 million tonne steel output, will be implemented with an investment of Rs16,000 crore,” he added.
Consultancy firm Mecon has been entrusted with the task of preparing the techno-feasibility report for the expansion project and the report is expected to be ready by December 2015.
The first phase will take 36 months from the zero date to complete and the second phase 4 years from that. The product mix after both the phases are completed will be hot rolled and cold rolled coils and sheets, wire and rods and special grade steel.
"Funding of the expansion will not be a problem for us. Apart from its equity investment, MMTC has given NINl working capital support of Rs 1,000 crore and also provided it corporate guarantee of Rs1,470 crore. Similarly, the State-owned Odisha Mining Corporation (OMC), another promoter of NINl, has extended it a corporate loan of Rs170 crore,” he said, adding that these loans could be converted into equity at the time of expansion.
Meanwhile, NINl awaits forest clearance for its captive iron ore mine located at Koida on the border of Keonjhar and Sundergarh district. The clearances are held up because of insistence of Ministry of Environment and Forest on carrying out a carrying capacity study by NERI on pollution and infrastructure issues.
The company hopes to operationalise its captive mine from October, 2016 which will bring down the raw material sourcing cost significantly. Based on these assumptions, SBI Caps has predicted return of the company to profitability from 2016-17 onwards. The company made a loss of Rs232 crore last fiscal due to adverse market conditions.