New Delhi: State-owned Rashtriya Ispat Nigam (RINL) has decided to prune stake in the USD 11 billion steel project in Afghanistan, the biggest investment proposal by a pack of seven Indian steel firms abroad, citing delay and uncertainty hovering over the venture.
RINL, which has 18 percent stake in SAIL-led consortium, Afghan Iron and Steel Consortium (AIFSCO), has decided to trim its stake to "as low as it can" in the project.
AIFSCO had in late 2011 announced setting up a 6.1 mtpa steel mill after getting three iron ore mines at Hajigak with an estimated reserve of 1.28 billion tonnes.
"RINL has decided to cut down its stake in the venture to as low as it can be from 18 per cent now. The company does not want to park up its funds in a far-flung project that is full of uncertainty and already much-delayed," a source told the agency.
The development may push the future of the project to further uncertainty.
SAIL has 20 percent stake in the Afghan venture; while PSUs NMDC and RINL hold 18 percent each. JSW Steel and JSPL hold 16 percent each. JSW Ispat and Monnet Ispat have 8 percent and 4 percent stakes respectively in the project.
"RINL's hands are quite tied-up. It is on the verge of commissioning its brownfield expansion to 6.3 mtpa and getting ready to embark on raising it further to 11 mtpa. It has got mines in Rajasthan and Andhra Pradesh.
"Developing these would require a lot of funds. Hence, RINL does not want to park up funds in a project which is yet to take a concrete shape," the source said.
However, attempting to reduce the vulnerability of the project in the war-torn country, AIFSCO in May decided to cut down the original plan by around 75 percent involving USD 2.9 billion investment for setting up a steel plant of 1.25 mtpa, a 120 MW power plant and creation of necessary infrastructure.
The source said RINL has already communicated its desire to the Steel Ministry and the final call on the proposal would be taken by the Ministry only. RINL is not a listed entity and is governed by a Board of Directors, headed by its Chairman A P Chaudhary.
"Even the partial exit of a state-run firm from the pack of seven companies in a project, in which government is also involved, will have repercussions on other firms, particularly those belonging to the private sector.
"Thus, the Steel Ministry will have to take a holistic view and take a call on the basis of that. It will be a difficult call, but will help a company aspiring to be bigger domestically," the source said.
Recently, India has seen two-big ticket domestic pull-outs by Posco and ArcelorMittal in Karnataka and Odisha. Monnet Ispat and Energy is also threatening to abort its proposed 1.5 mtpa steel plant in Jharkhand.