SAIL-Moil ventures may be called off

The forward integration plans of Manganese Ore India (Moil), touted as one of the selling points of Moil’s initial public offer (IPO) — which hit the capital markets in December 2010 — are in jeopardy.

During the IPO, Moil had said that it has signed two separate joint venture (JV) agreements with the Steel Authority of India (SAIL) and Rashtriya Ispat Nigam (RINL), respectively to set up two ferro alloys plants.

As per the agreements signed with SAIL, Moil was to set up a plant with a capacity to produce 31,000 tonne of ferro manganese and 75,000 tonne of silico manganese at a cost of Rs392 crore.

The plant was to come up in Chhattisgarh in two years.

Likewise, its JV agreement with RINL said it would set up a 20,000 tonne ferro manganese and 37,500 tonne of silico manganese plant at a cost of Rs206 crore. This plant was to come up in Vizag, Andhra Pradesh, again, in two years.

The ventures would have helped Moil, the country’s sole public sector manganese producer and the biggest supplier of manganese to state-owned steel companies, to ensure value addition of its produce and earn better margins.

For the record, steel companies consume 30 kg of manganese for producing a tonne of steel. The process involves conversion of manganese into ferro alloys before it can be added for greater strength and ductility of the steel produced.

Company officials claim these plans are very much in place and are only stuck in some procedural issues.

Reliable sources, however, say the JVs are on the verge of being called off.

SAIL, according to them, plans to go ahead with its own ferro alloys plant as it is not happy with Moil’s progress on the same.

But the JV companies have failed to start work, leave alone place orders with equipment suppliers and tying up power for the same, particularly considering ferro alloys manufacturing is a highly power intensive project.

“The project is on and we are trying to secure power supply,” said M A V Goutham, director - finance, Moil.

Asked what was delaying the project, he said Moil has not been able to reach an agreement with the furnace supplier for the cost of the furnace, for both SAIL and RINL JVs. However, he did not reveal who the furnace supplier was and why has it taken more than two years to reach a consensus on price.

“The JVs are not called off and we are looking at the business keenly,” said C S Verma, chairman and managing director, SAIL.