Experts say new steel plants in Andhra and Telengana viable, with caveats

HYDERABAD: The proposed steel plants in Andhra Pradesh and Telangana, promised to each of the two Telugu speaking states as part of the bifurcation of the united Andhra Pradesh, has generated much heat because the projects have not gotten off the ground 4 years since the split. Steel industry experts, however, appeared to be optimistic on the viability of the steel plants, with caveats.

According to Arnab K Hazra, assistant secretary general of the New Delhi-based Indian Steel Association, the proposed 1.5 million tonnes per annum (mtpa) would be greenfield projects. Asked whether a 1.5 mtpa would be viable as a commercial enterprise, Hazra said that the plants’ viability would depend on the easy availability of critical raw materials like iron ore and coking coal.

Says BN Singh, a former chairman and managing director (CMD) of Rashtriya Ispat Nigam Ltd in Visakhapatnam, “If the proposed steel plant in Khammam district of Telangana gets assured iron ore supplies from the Bailadila mines in Odisha, which is about 400 km from Khammam, then a 1.5 mtpa plant can be viable. But the issue that needs to be resolved is the supply of coking coal, which has to be imported. The nearest port for importing the coal would probably be Visakhapatnam, which is about 430 km away. The steel plant will have to get a consistent supply of coking coal for it to be viable.”

“The Khammam steel plant will need to be clear about its product portfolio—that is whether it will make flat or long products. Long products are hot and cold rolled bars, rebars, railway rails, wires and stranded wires. These products are used in the construction and capital goods industries, which are growing sectors,” Dr Singh, who worked for ArcelorMittal in Algeria and several other steel plants in India after retiring from RINL, said.

According to another former CMD of RINL, the Kadapa steel plant appeared viable because of the availability of iron ore in the neighboring district of Anantapuramu (Anantapur) and the contiguous district of Bellary in Karnataka. Again, the coking coal for the plant would need to be imported either through the ports of Krishnapatnam in Andhra Pradesh or Ennore in Tamil Nadu, which are, respectively, 200 km and 260 km from Kadapa. Both seaports handle break bulk cargo like coking coal.

Another critical raw material for the steel plants would be the availability of water. “There are several rivers and their tributaries flowing through Kadapa district, so water supply can be brought to the plant using a pipeline. Similarly, there is a river flowing through Paloncha in Khammam district where the steel plant in Telangana is proposed to be located, so it should not pose a serious problem,” the second former CMD of RINL said.

Dr Singh said that rather than demanding for a new steel plant in Kadapa, the Telugu Desam Party government of N. Chandrababu Naidu should work with the Union government to take control of RINL, which is supervised by the Union Steel Ministry.

“RINL has great advantages. Firstly, it has an assured iron ore supply from Bailadila. Second, it can import thermal and coking coal either through the port of Visakhapatnam or Gangavaram Port. If the Andhra Pradesh government is given control of RINL, then the Naidu government can work to increase its capacity to over 10 mtpa from the current seven mtpa,” Dr Singh said.

The possibility of either Naidu requesting control over RINL, or the Modi government handing it over to the AP government appear remote because of the animus between Naidu and the centre appears unbridgeable after the TDP exited from the NDA government in March this year.