Hyderabad: The proposal to set up a steel plant jointly by state-owned NMDC and Russia's Severstal has been put "in cold storage" as both the companies are not willing to lose management control of the joint venture, a senior official of Steel Ministry has said.
The Ministry is apprehensive that any lenience towards the foreign investor may potentially affect the agreement another PSU SAIL had with South Korea's Posco to form a joint venture company at Bokaro for a three?million ton per annum (mtpa) steel-making unit last year with Rs 16,000 crore investment, the official said.
NMDC had inked an MoU with Russia's second largest steel maker Severstal in late 2010 for a 3 mtpa capacity plant in Karnataka with around Rs 16,000 crore investment.
However, differences cropped up between the companies on shareholding patterns as both wanted more than 50 percent in the proposed JV in order to gain management control.
"As per the international financial reporting standards which India is going to follow from next fiscal, whoever has the management control will consolidate the subsidiary accounts in its accounts.
"Our government wanted the JV financials to be reflected in our books. As of now the issue is in cold storage," the official who requested anonymity said adding "any decision in favour of Severstal may impact Posco agreement also".
NMDC and Severstal signed the implementation protocol for the project during a visit by an Indian government delegation to Moscow in November 2011.
As per the protocol, NMDC and Severstal will have to meet the JVs captive requirements for raw materials.
Until the captive assets are fully developed, both the companies will supply coking coal and iron ore to the JV from their existing assets or alternative sources.
"The other issue is mining ban in Karnataka. Until the ban is lifted and captive mine is allotted to the JV, the issue will not be taken up. NMDC is not willing to give its iron ore mines for the JV," the official added.
There may not be any development on the issue at least for the next two to three years unless Severstal agrees for 50 percent, the official said.
First Published: Thursday, December 27, 2012, 17:58