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Indian consortium scraps gigantic Afghan project

Indian consortium scraps gigantic Afghan project

May 23, 2015 - 14:50

KABULinfo-icon (Pajhwok): After developing cold feet over the proposed $10.8 billion steel Hajigak iron ore mine project in Afghanistaninfo-iconconceived in November 2011, the SAIL-led consortium of leading Indian steelmakers has now decided to scrap the project altogether, Indian media reports.

The Financial Express reports that an inter-ministerial group is learnt to have come to the conclusion at its latest meeting that it would be prudent not to pursue the project.

Though some perceive Afghan president Mohammad Ghani’s pro-Pakistaninfo-icon leanings could also be a reason for the move, sources in the know say the plan never really seemed progressing in the last four years though the Indian companies were initially “very bullish” about the project.

Afghan Iron and Steel Consortium (AFISCO) had got for three high-grade iron ore mines, having an estimated reserve of 1.28 billion tonne. The seven-member consortium, which includes JSW Steel, JSPL, NMDC and RINL, devised the plan to set up in phases a 6.12 million tonne steel plant, an 800 MW power facility, create infrastructure for mine development and necessary infrastructure at a cumulative investment of $10.8 billion over 11-15 years. This was meant to be the biggest foreign investment proposal by Indian firms.

Hopes gradually turned into apprehensions over security concerns triggered by militant attacks on the Indian consulate in Herat, on a SpiceJet plane at Kabul airport and on a UK embassy car in Kabul. Attempting to reduce the vulnerability of the project in the war-torn country, the investment plan was later pruned by 75% to just $2.9 billion for a 1.25 mtpa steel plant, 120 MW power plant and for creation of necessary infrastructure.

Citing delay and uncertainty hovering over the venture, state-run Rashtriya Ispat Nigam, which has 18% stake in the special purpose vehicle, had earlier written to the steel ministry seeking to reduce its stake in the venture to “as low as possible”. A company official earlier said, “The company does not want to park up its funds in a far-flung project that is full of uncertainty and already much delayed.”

At a January meeting of the inter-ministerial group consisting of representatives of the ministries of externalinfo-icon affairs, steel, railways and finance, the consortium members had expressed “apprehensions” on pursuing the project, but it was decided they should stay engaged with it. At the latest meeting on April 22, the group decided to pull the trigger taking a view that the project be dropped.

Sources said the trigger for pulling out from the project altogether was not just the recent attacks in Kabul, but also the critical aspect of the project. The consortium members in a recent meeting expressed concerns on technical feasibility due to absence of road connectivity both for import of plant and machinery and for evacuation of the finished products.

“They expressed apprehensions on the economic viability of the project due to the steep decline in global iron ore and steel prices and the increased cost of production since the time the bid was submitted in September, 2011,” a senior government official said.

SAIL and NMDC have 20% and 18% stakes, respectively, in the Afghan venture. Private-sector JSW Steel and JSPL hold 16% each, while erstwhile JSW Ispat and Monnet Ispat have 8% and 4% stakes, respectively.


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