India's SAIL Proposes Revival of Fertilizer Unit and Construction of Steel Mill on Abandoned Site

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Researched by Industrial Info Resources (Sugar Land, Texas)--Steel Authority of India Limited (SAIL) (BSE:500113) (New Delhi) has proposed taking over and reviving a defunct nitrogenous fertilizer plant at Sindri in Jharkhand. The plant currently belongs to government-owned Fertilizer Corporation of India (FCI) (New Delhi).

In a proposal submitted to India's Ministry of Chemicals and Fertilizers, which controls FCI, SAIL has proposed an investment of $7.6 billion to revive the Sindri fertilizer plant in collaboration with a domestic or foreign fertilizer manufacturer and also construct a 5 million-ton-per-year steel mill, taking advantage of the 6,000 acres of surplus land available at the existing fertilizer manufacturing unit.

The SAIL proposal comes in response to an invitation floated by the Ministry of Chemicals and Fertilizers for domestic and global investors to take over and revive the ailing or defunct nitrogenous fertilizers units of FCI, which has fertilizer manufacturing plants at Sindri, Jharkhand; Ramagundam, Andhra Pradesh; Talcher, Orissa; and Gorakhpur, Uttar Pradesh, with an aggregate capacity of 656,800 tons of nitrogenous fertilizers such as urea. The Ministry of Chemicals and Fertilizers has also floated similar invitations for takeover and revival of the closed fertilizer plants at Durgapur, West Bengal; Namrup, Assam; and Barauni, Bihar, under the government-controlled Hindustan Fertilizer Corporation (New Delhi).

This is the second proposal by SAIL to revive the Sindri plant and construct a steel mill. The first proposal was rejected by the Ministry of Chemicals and Fertilizers on the grounds that SAIL did not have expertise in fertilizer manufacturing and that the sole intent of the proposal was to gain control of the surplus land to set up a steel mill. To circumvent these objections, SAIL has proposed that it will enter into a collaboration with a domestic or foreign investor with experience in fertilizer manufacturing.

SAIL officials said that investments in Sindri would be strategic for the company since it would have logistical, infrastructural and raw material linkages to SAIL's existing Bokaro Steel Mill in the same state of Jharkhand. SAIL is investing $386.5 million to develop the Chiria iron ore mines in Jharkhand to extract 7 million tons of ore per year in the first phase and ramp up production to 14 million ton per year in the second phase to provide feedstock for the Bokaro Steel Mill, the production capacity of which is being expanded from 5 million tons to 7 million ton per year. SAIL has also signed a memorandum of understanding with POSCO (NYSE:PKX) (Pohang, South Korea) to construct a 12 million-ton-per-year greenfield steel mill in Bokaro.

SAIL's five integrated steel plants are in Bhilai, Chattisgarh; Durgapur, West Bengal; Bokaro, Jhkarkhand; Burnpur, West Bengal; and Rourkela, Orissa. The company has four iron and steel alloy production units in Bhadraavati, Karnataka; Chandrapur, Maharasthra; Durgapur, West Bengal; and Salem, Tamil Nadu.

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