SAIL, Tata Steel sign pact to develop coal blocks

New Delhi: India’s two biggest steel makers, public sector Steel Authority of India Ltd (SAIL) and private sector Tata Steel Ltd, have formed a joint venture company (JVC) to mine coal blocks for securing assured coking coal supply to meet their increasing production needs.

“SAIL and Tata Steel have signed an agreement to form a 50:50 JVC to identify and develop coal blocks in India. This is a significant step for both the companies which need coking coal for their current and future production needs,” Mr B. Muthuraman, Managing Director, Tata Steel, said while addressing a press conference here on Thursday.

Both companies have embarked on major capacity expansions to ramp up production capacities. While SAIL aims to increase output to 26 million tonnes at a cost of more than Rs 50,000 crore, Tata is also executing major brownfield and greenfield expansion projects.

Identified blocks

He added that the JVC has identified four suitable medium coking coal blocks in Jharkhand with reserves of around 600 million tonnes and is under evaluation by a joint working group of SAIL and Tata Steel.

“The Board of the JVC would have representatives from both the companies and the new entity would have an initial capital of Rs 2 crore, to be shared equally, and we expect the first project to be conceived in the next six to eight months,” Mr S.K. Roongta, Chairman, SAIL, said.

“On allotment of the blocks, the joint venture company will develop and carry out mining for captive use of both the companies with an estimated investment of about Rs 10,000 to Rs 12,000 crore,” he added.

Mr Muthuraman also said that the cooperation may be extended to other areas. “Though at the moment we are beginning with coal, the cooperation may be extended to iron ore mining and steel making in the future,” he said.

Mutual benefit

He also denied that there was cut-throat competition between the two in the domestic steel market. “You can work for each other’s advantage. Competition does not mean that you kill your competitor. Interestingly, even though we are in competition we discuss market scenario and other issues,” he added.

Endorsing Mr Muthuraman’s views, Mr Roongta said that there was nothing wrong if both the companies explored mutual opportunities in coal mining as Tata Steel had the requisite expertise for mining coal.

Mr Muthuraman also said that the projections of consumption of about 100-150 million tonnes of steel by the end of the current five year plan was small and the planning should be done to ensure adequate raw material security for 500 million tonnes in the coming years.