Home ECONOMY Odisha govt sets terms for SPVs to expedite steel projects

Odisha govt sets terms for SPVs to expedite steel projects

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Reported by Chinmaya Dehury

Bhubaneswar, June 16:

The Odisha government has given its in principle consent to be a partner in the Special Purpose Vehicle (SPV) proposed by the Union Steel Ministry, which has planned to revive investor interest in the sector by creating SPVs that will acquire all government approvals required to start a steel plant and then hand them over to private companies to go ahead with project implementation.

Odisha Govt LogoThe government, however, has given some suggestions before the finalisation of the Memorandum of Agreement (MoA) to be signed between Odisha government, Ministry of Steel and National Mineral Development Corp. (NMDC) for formation of SPVs.

The steel ministry has proposed that the NMDC head the SPVs, along with the state mineral development corporation (SMDC) that is Odisha Mining Corporation (OMC) in Odisha. The ministry wants to roll out the SPV model in four mineral-rich states: Karnataka, Odisha, Chhattisgarh and Jharkhand.

“The proposed holding company (JV with NMDC and Odisha government) to oversee all the projects in the state, may not be required as such a proposal would have been advisable in case there would have been multiple projects and 2nd tier SPVs (project specific SPVs) as in case of PFC for UMPPs which has multiple SPVs across the country. Therefore, it is suggested that we may have only project specific SPVs,” said the Odisha government in its suggestion.

It also said that SPVs proposed with SMDCs would be critical for establishing mining linkage for the project which would be as crucial as land and other statutory approvals.

“It is important to ensure that adequate mineral linkage support is provided in favour of project SPV with firm and assured supply arrangements and pricing. Absence of assured mineral linkage would not result in making the proposal attractive resulting in poor response from the market at a later stage. However, it is suggested that the project SPV may not be entrusted with the activity of arranging mineral linkage as such activity may dilute its effort for timely fulfillment of its objectives – land, infrastructure and clearances,” said the government.

Batting for IDCO, the government said the state PSU’S participation on behalf of the state in the project SPV should be welcomed due to its capabilities in land acquisition, infra linkages and obtaining clearances.

With respect to provision in the MOA regarding allocation of water, the government suggested that the provision that state shall endeavour to unlock the water earmarked under existing MoUs which have not progressed for allocation in favour of SPV may be relooked.

As per the steel ministry plan, NMDC and the state agency will do the land acquisition and get the statutory clearances, like environment and forest, and also ensure the iron ore linkages for the project. The steel SPV project will then be auctioned out to steel companies, while NMDC and the state agency will retain the mines.

It is to be noted that numerous infrastructure projects have been stalled by delays in securing mandatory government and regulatory approvals. While South Korean steel maker Posco’s plant in Jagatsinghpur has been awaiting approvals for mining the Khandadhar iron ore block since 2005, the government is yet to hand over the land for setting up the project. Steel Authority of India Ltd (SAIL), Jindal Steel and Power Ltd (JSPL), Tata Steel Ltd, Bhushan Steel Ltd and Visa Steel Ltd are also facing delay in the project following pending of various clearances.