SAIL, ArcelorMittal finalise terms of Rs5,000-cr joint venture: reports
01 Jun 2017
Steel Authority of India (SAIL) and global steel giant ArcelorMittal have reportedly finalised the commercial terms of their Rs5,000-crore ($897 million) joint venture to manufacture automotive grade steel in India.
ArcellorMittal, the world's largest steel producer, will make concessions to Steel Authority of India to get a delayed automotive joint venture going, reports said, adding that a deal is likely soon.
The two companies have agreed on key commercial terms, including non-compete and exit clauses as well as finalising policy on arbitration, reports quoting sources with direct knowledge of the negotiations said.
The joint venture would export a fifth of the auto-grade steel it makes under the terms agreed to by the two parties, according to a Reuters report.
ArcelorMittal is also reported to have made some concession on technology under the strategic partnership as a deal is crucial for the company to enter India, the only big steel market where demand is rising fast and government policy is increasingly favoring locally made products.
India currently imports most of the high-grade steel used by the automobile industry from countries such as Japan and South Korea. The SAIL-ArcelorMittal partnership will help reduce those purchases and turn India into a net exporter, the Reuters report cited a NITI Aayog document on talks aimed at resolving a list of outstanding issues said.
For SAIL, which has been in the red for at least seven straight quarters, the joint venture would enable it to compete with local rivals such as JSW Steel and Tata Steel who have foreign partnerships to make steel for the car industry.
ArcelorMittal, controlled by India-born billionaire Lakshmi Mittal, may follow up the joint venture with a ramp-up of its India presence through purchase of stake in three of SAIL's weak units, reports pointed out.
The government is in the process of divesting stake in SAIL's loss-making units, including at Durgapur in West Bengal, Bhadravati in Karnataka and Salem in Tamil Nadu.
Steel minister Chaudhary Birender Singh had earlier said talks between ArcelorMittal and SAIL for the joint venture were in the "final stages".
It is not clear when a final deal would be reached. Government officials said the timeline for the venture would get an official extension but no date has been specified.