State-run iron ore miner NMDC is in talks with banks and other financial institutions to raise around Rs 5,000 crore debt to part-fund its under-construction Rs 21,300-crore Nagarnar Steel Plant (NSP) that is likely to be operationalised by October this year, NMDC’s chairman-cum-managing director Sumit Deb said.
A pure-play miner, NMDC had in 2009-10 conceived the three million tonne per annum (MTPA) Nagarnar plant in Chhattisgarh with the intention of moving up the value chain and diversifying its portfolio. The idea was also to hedge itself against the vagaries of iron ore prices. Work for setting up the plant started in 2010-11 and was initially supposed to be commissioned by 2016.
Time overrun has led to the cost overrun for the steel plant. Against the initial estimated expenditure of Rs 15,525 crore for the steel plant, it is estimated that NMDC might eventually end up spending around Rs 21,300 crore to bring the plant under operation. NMDC has spent a total of Rs 18,562 crore on the plant. It raised Rs 524 crore from the bond market and the remaining from its own coffers.
“As per our revised estimate, the steel plant would require Rs 21,300 crore investment. We have already spent Rs 18,562 crore. We have initiated talks with banks and other financial institutions to raise around Rs 5,000 crore debt soon,” Deb said.
The Cabinet Committee on Economic Affairs (CCEA) had on October 14, 2020, gave its ‘in-principle’ approval to the demerger of NSP from NMDC and strategic disinvestment of the demerged company by selling entire stake of the government to a strategic buyer.
Deb said the proposed demerger of NSP will happen almost around the same time the plant will be operationalised around October this year.
“Once the steel plant is demerged, the debt will also be transferred with the steel plant,” the CMD said, adding that the average interest rate of the debt is likely to be around 7%.
The disinvestment proposal has fuelled a feeling of discontent among locals and particularly those who gave up their land for the steel plant. They wanted the unit to retain its public sector character and were against giving the management control to a private firm. The state government is also opposed to the plan.