SAIL-led consortium's $10.8 bn Afghan plan to take off soon

AIFSCO has public sector firms SAIL, RINL and NMDC holding a combined 56 percent stake.

Updated: Aug 22, 2013, 15:30 PM IST

New Delhi: Stating that negotiations between Afghanistan and SAIL-led consortium involving USD 10.8 billion project are over, the Islamic Republic on Thursday said it does not have any objection to AIFSCO planning to develop it in phases.

AIFSCO has public sector firms SAIL, RINL and NMDC holding a combined 56 percent stake. The rest is held by private players such as JSW, JSPL and Monnet Ispat & Energy among others.

"We have concluded negotiations. This is a huge project. During negotiation, SAIL has assured us that it will deliver their commitment, but that could be done in phases. That is natural with this type of mega projects," Wahidullah Shahrani, Afghanistan's Mines Minister told reporters here.

After winning bid to mine three iron ore mines at Hajigak in war-torn Afghanistan in November, 2011, Afghan Iron and Steel Consortium (AIFSCO) had said it would invest $10.8 billion to set up a 6.1 mtpa steel plant in two equal phases along with a 800 MW power plant, besides creating necessary infrastructure.

However, later it decided to scale down the original plan by around 75 per cent, with consortium members deciding to set up a steel plant of 1.25 million tonne per annum (mtpa) and a 120 MW captive power plant with USD 2.9 billion investment.

When asked on the issue, Shahrani evaded any direct answer, saying eventually, the steel plant would be of the 7 mtpa size and the consortium would invest the committed amount of USD 10-11 billion.

"Eventually, investment will between USD 10-11 billion. It will be done in phases. However, it will depend on the cost of exploration and fluctuation of the prices of raw material. The investment could go up. What is important is the commitment," he said.

"Steel plant will be developed, based on our negotiation, in different phases, but eventually it will be of seven mtpa size. But, for that they need to conduct the feasibility side. In first 2-3 years, they need to conduct detailed exploration. Then they will do the bankable feasibility study which will determine what will be the capacity in first phase. It could be any number," he added.

Shahrani said final agreement between Afghanistan would be signed in a few weeks as the draft contract has been prepared. The pending approvals from the Afghan government to take the project forward is also "a matter of four to five weeks."

"I don't see any bottleneck from our side," Shahrani said, adding local government would also allow the SAIL-led consortium to market its products in the neighbouring region.

Afghanistan's annual steel demand currently stands at 1-1.5 mtpa. However, the demand would go up while rebuilding the war-torn nation.