Steel Ministry drags its feet over Paradip steel project

Patnaik (left) and Mukherjee: Strong political pressureIs the Paradip steel project also going the Thal Vaishet way? New Delhi is agog with rumours that the Steel Ministry wants to appoint a foreign consultant instead of awarding the contract on a turnkey basis; that if the turnkey approach is abandoned in favour of a Kudremukh-type job, the two short-listed bidders, Davy International and Mannesmann Demag, may decide to pull out altogether; and that the project location may be shifted from Paradip in Orissa to Haldia in West Bengal.According to Orissa Chief Minister J.B. Patnaik, there is strong pressure from the Steel Ministry - and the so-called Bengali lobby apparently led by Steel Minister Pranab Kumar Mukherjee - to shift the plant location from Orissa to West Bengal, ostensibly on the grounds that Paradip is prone to cyclones. Patnaik says that this cannot really be the main ground since Visakhapatnam, where a new steel plant is slated to come up, is also cyclone prone.Although Patnaik did not say so, the location is apparently being used as a bait in the coming electoral warfare with the Communist Party of India (Marxist). Jyoti Basu's Government has been complaining for years that the Centre has an animus against West Bengal in the allocation of public sector projects.Pranab Kumar Mukherjee and his Congress (I) friends, it is said, are dangling the offer of a Rs 2,500 crore steel plant, the biggest project in the Sixth Plan, as a prize in the electoral stakes.Complications: This may be one reason why the Steel Ministry is apparently dragging its feet over a project that is supposed to enjoy the highest priority. Another possible reason is that the ministry is not too keen to hand over the project entirely to foreign contractors as a turnkey package and virtually remove itself from the scene after awarding the contract to one of the bidders.The idea is to have a foreign consultant - the name of Metchem, a Canadian firm which was consultant on the Kudremukh, job, is mentioned as a possible candidate - who would work with Mecon (Metallurgical & Engineering Consultants), a public sector company, acting as its counterpart on the Indian side.This will not only keep the Steel Ministry and the Steel Authority of India Ltd (SAIL)in the picture but also give Mecon something to do as the firm does not have a major contract on its hands and is anxiously looking for work.Mecon is not, however, too happy at the way the Paradip - or Haldia - operation is working out as it would not be the main consultant on the job and would have to play second fiddle to the foreign consultant, whoever he is.To add to the complications, the appointment of a foreign consultant may not be a straight forward affair as he would have also to take responsibility for arranging the financial package for the project - which was the main reason for offering the job as a turnkey operation in the, first place.According to knowledgeable sources, it seems most unlikely that either Davy International or Mannesmann Demag could be persuaded to give up their earlier role as contractor and act as consultant, for there is not much money in the second function.For instance, Dasturs may not get more than Rs 40 crore for their consultancy work on the Visakhapatnam project. Davy and Demag are large machinery manufacturers in their own right and would undoubtedly bridle at any decision that deprives them of a major share in the supply of plant and equipment.In the meantime, there are no signs that the SAIL plants have turned the corner. The steel industry reached its peak in 1976-77 when the combined output of public sector steel plants and Tata Steel reached 6.9 million tonnes of saleable steel.The industry has not been able to top this level though, since that year, the capacity of Bokaro has gone up by 50 per cent. With the kind of political manipulations in which Paradip is now involved, it is unlikely that the project will get off the ground before the end of the year, and if there is a shift in the location, the delay might be even longer.By that time, the cost would have gone up to nearer Rs 3,000 crore, if not more, and the Viability of the project may be in serious jeopardy. There are many in Delhi who have already given up the project as a hopeless case.Published By: AtMigration Published On: Nov 23, 2013 12:46 IST--- ENDS ---

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Steel Ministry drags its feet over Paradip steel project

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