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Govt may offer soft loans to steel makers for Afghan project

Last Updated: Sunday, May 26, 2013 - 15:27

New Delhi: The government is considering offering concessional finance to the SAIL-led consortium for developing iron ore deposits at Hajigak in Afghanistan and creating the necessary infrastructure, sources said.

The amount and ways of financing from the government side may be decided at a meeting of the co-ordination committee of secretaries, convened by Cabinet Secretary Ajit Kumar Seth, on May 31, sources said.

A soft loan is one with a below-market rate of interest and may also include concessions like long repayment period or interest holidays.

After winning the bids in November 2011, the seven-member consortium of domestic steel firms, AIFSO, had said it would invest USD 10.8 billion in the war-torn country for setting up steel and power plants and creating necessary infrastructure.

It, however, recently decided to scale down the size of the proposed steel plant in first phase to 1-2 million tonnes per annum (mtpa) from 3 mtpa to reduce the vulnerability of the project.

However, the creation of necessary infrastructure such as 200 kms each rail, road and transmission line network for the mine and steel project is not a choice, but a necessity, the sources said.

AIFSO needs financial support for the creation of the infrastructure from the government as the chances of getting loans from banks is almost bleak since lenders are wary of exposure to the war-torn country, they said.

The consortium had earlier said the immediate investment of USD 75 million, mainly for geological and exploration study of the mines, having an estimated resource base of around 1.8 billion tonnes iron ore, will be met internally by consortium members in the same proportion of their partnership.

This study would take nearly three years for completion, but infrastructure has to be put in place in tandem with the development of the mines for evacuation and transportation.


First Published: Sunday, May 26, 2013 - 15:27
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