When Afghanistan president Hamid Karzai’s government chose the Indian consortium as the preferred bidder for three of the four iron ore blocks in Hajigak mines that are estimated to hold more than 1.8 billion tonnes of iron ore, very few people noticed that the deal would benefit one business group (family of a Congress MP) which is said to be close to the UPA government.
The SAIL-led consortium AFISCO (Afghan Iron & Steel Consortium) has a few government entities but all the private players are connected to the OP Jindal family. Between them all the companies associated with the family holds a whopping 44% stake in the consortium which would soon start mining the world’s second largest iron ore mine. According to sources in the government familiar with the deal, the estimated reserves of iron ore is 1.2 billion tonnes. At even conservative estimates iron ore fetches Rs4,000 per tonne. This easily translates into thousands of crores in profits for the consortium and its member companies.
A Maharatna PSU like SAIL has strict conditions for investing and operating since it involves public funds. Incidentally, it also has an additional secretary and a joint secretary from the union ministry of steel as members of the board of directors besides other luminaries such as Isher Judge Ahluwalia, the wife of Planning Commission deputy chairman Montek Ahluwalia. Despite such measures in place, it is not clear how SAIL chose the four private companies who, believe it or not, are all either headed by Naveen Jindal or his relatives. It is not clear if they went to the Cabinet Committee of Economic Affairs (CCEA) before selecting these private partners in the consortium since it envisages such a massive outflow of public funds.
Interestingly, the largest stake in the consortium after the government entities goes to JSPL, headed by OP Jindal’s son and Congress MP from Kurukshetra, Haryana, Naveen Jindal. He is also a director in some of the other companies which were made a part of the consortium under curious circumstances. This issue has raised many eyebrows since Jindal is also facing heat from the CBI in the coal scam as an accused.
JSPL and JSW hold a 16% stake each in the consortium. Incidentally, JSW is headed by Sajjan Jindal, Naveen’s brother. Another company also headed by Sajjan Jindal, JSW Ispat holds 8 % and Monnet Ispat & Energy holds the balance 4% stake. Curiously enough, Sandeep Jajodia, managing director of Monnet Ispat and Energy is son-in-law of the late industrialist OP Jindal and brother-in-law to the two Jindal brothers.
This is the first time that Indian public and private sector companies have come together to jointly bid for an iron ore asset abroad. The consortium has majority stake by public sector companies with SAIL, NMDC and RINL holding a combined stake of 56%. SAIL being the lead partner holds an equity stake of 20% while NMDC and RINL hold 18% each. According to Mr V S Jain, who was the CMD with SAIL until 2008 and Jindal Stainless Ltd after his superannuation told dna that as a maharatna SAIL did not need any permission to engage any other private player. However he refused to comment on the formation of this particular consortium.
Sources in the industry say that the decision to include Jindal companies in the consortium was done without any scrutiny by the Steel Ministry which oversees SAIL. Though there were eight other steel companies from India that showed interest in the project after surveying the iron ore mine blocks, only companies related to the Jindal family were chosen, sources said.
The bid submitted by AFISCO to the Afghanistan government proposes development of the Hajigak iron ore deposits in the Bamian province to carry out commercial production of iron-ore. The consortium also proposed setting up of a 6.12 million tonnes per annum (MTPA) steel plant in Afghanistan in two phases.
The plan envisages installation of an 800 MW power plant in two phases of 400 MW each to cater to the operations of the mine and steel plant. As part of building necessary internal infrastructural support, the consortium plans to build 200 kms each of rail, road and transmission line network for the mine and steel project. The total investment by AFISCO on all of the above is estimated to be about US$12 billion in phases.
When contacted by dna, Monnet & Ispat Ltd stated: “It is wrong to view that the private members are connected to one family since the window was open for all.”
Since the project has a very long gestation period & has many security threats for it being in Afghanistan, many companies did not participate, they said.
Meanwhile JSPL in a written reply told dna that it would not be able to comment on the issue at this point. Both JSW and SAIL did not respond till the time of going to press.
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