More skeletons are coming out of the closet regarding the non-binding MoU signed between the POSCO and RINL for setting up of integrated steel plant in Visakhapatnam with a final production capacity of 7 to 10 million metric tonnes per annum (MMTA. All this came from the government side when an RTI query has revealed the hitherto unknown facts about the deal.
The contents of the nonbinding MoU came to light in a reply from the Union Ministry of Steel under the RTI Act. The MoU says that the new steel plant planned by the JVC was to produce hot-rolled coils, plates, pickled and oiled coils, cold-rolled coils and galvanized coils. Significantly there is a mention in the MoU that the JVC would grant the Korean company’s Indian subsidiary ‘POSCO Maharashtra’ a preferential right to purchase hot rolled coils at a competitive price if the quality and quantity specifications were met.
The most important aspect of the MoU was that POSCO and RINL will have an option to include a third party as an additional shareholder to the JVC proposed both the companies agree on participation of such third party. The MoU was signed by POSCO senior vice-president Kyeong Chan Kim and RINL’s director (projects) KK Ghosh The shore-based Visakhapatnam Steel Plant being run by RINL at Vizag has already augmented its production capacity from 3 million tonnes to 6.3 million tonnes, and subsequently to 7.3 million tonnes with an investment of nearly Rs 17,000 crores.
Pursuant to the MoU, a Joint Working Group (JWG) has been formed for the exchange of information between POSCO and RINL. According to the MoU, POSCO will hold 50 percent shares while the share-holding pattern of the RINL will be decided on the basis of the land it contributes towards setting up of the steel plant. The production augmentation will be done in stages on the basis of feasibility and as per the mutual agreement.
The capacity expansion and requisite infrastructure to be constructed and installed at the new plant will be decided on the basis of mutual agreement between RINL & POSCO by taking the conditions of the site like size and shape into consideration,” said the MoU. While the initial offering by RINL was 1,167 acres of land for the new steel plant, the MoU said the Navaratna company will cooperate to offer an additional site within Vizag Steel Works, after obtaining the approval of the ministry of steel if request by POSCO after reviewing the facility layout of the new plant.
This additional offering would be subject to the availability of an additional site. The valuation of the site will be conducted by an outside expert chosen by both parties. In the past, POSCO had a failed attempt to set up a 12 million tone steel plant in Odisha’s Jagatsinghpur district with an investment of Rs 52,000 crores due to environmental issues.