SAIL to invest Rs800 crore to develop Bhilwara mine

State-owned Steel Authority of India Ltd (SAIL) plans to invest Rs800 crore to develop its Bhilwara iron ore mine in Rajasthan, where it has had set up a 2 MTPA  pellet plant.

The state government, last week, granted the steel maker, the lease to the mine spread over 871 hectares with estimated reserves of around 150 MT.

According to SAIL chairman CS Verma, the company plans to produce 5 MTPA iron ore a year from the mine and set up a pellet plant with 2 MTPA capacity with an estimated investment of Rs700-800 crore.

SAIL would initiate the process of acquiring  clearances following award of letter of intent (LoI) from Rajasthan government. The mine is expected to go into commercial production in 3-4 years, he said.

When the Bhilwara mine goes into commercial production, SAIL would be able to partially meet its increased iron ore need as the company raised its steel-making capacity to 24 MTPA by next year from 14 MTPA at present.

Around 1.6 tonnes of iron ore go into the production of a tone of steel.

Thanks to its captive capacity, SAIL had never faced iron ore supply problems before, and the steelmaker, recorded an output of 13.4 MT crude steel from 21.48 MT ore last year.

In view of the projected capacity addition, its need for the key input is expected to rise proportionately with the Bhilwara mine helping meet the projected production.

The announcement comes close on the heels of prime minister Manmohan Singh calling on the domestic steel industry to gear up for achieving a production level of 300 MT within the next decade, the Indian Express reports.

According to the report, unveiling SAIL's newly formulated vision document, Verma said, in addition to the ongoing expansion, and modernisation programme, SAIL aimed to diversify its product mix to achieve a 50 MT capacity by 2025.

Verma sought to allay apprehensions that the company's borrowing capacity might suffer due to tight liquidity position and increased lending costs, by pointing out that SAIL had a net worth of Rs41,000 crore and retained a borrowing capacity of Rs82,000 crore.

According to Verma the company's borrowing was Rs21,000 crore with most of the ongoing expansion completed. He added that the company had adequate land bank and necessary infrastructure to undertake fresh projects.

Citing China boosting production from 190 MT to 800 MT in 10 years, he said the 300 MT target was not ambitious and there was no reason why India could not do what China had done.