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Ambarish Mukherjee

For acquiring coking coal blocks

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New Delhi Jan. 26 After the successful experience of ONGC Videsh in the oil and gas sector and the blockades faced by Coal India Ltd's (CIL) proposed plan to float an overseas arm, Coal Videsh, (which still awaits clearance from the Government) public sector steel major Steel Authority of India Ltd (SAIL) is planning to set up an overseas arm.

Unlike ONGC and CIL, whose overseas plans had been primarily to procure the final product that they sell to the customers, SAIL's overseas plan is essentially to source raw material - coking coal, sources said. SAIL's plan is to acquire coking coal properties abroad through this foreign subsidiary and not for setting up steel plants or to acquire existing units.

The move comes particularly in light of the fact that CIL's plan to set up Coal Videsh has not taken off yet and there are no indications available whether the plan would take off at all, sources said.

SAIL was expected to pick up equity stake in Coal Videsh and the Steel Ministry had, in the first half of 2006, also floated a Cabinet note to this effect. The Steel Ministry was of the view that if CIL could move ahead with its overseas plans, the two steel making units under the Ministry, SAIL and the Rashtriya Ispat Nigam Ltd (RINL), could join CIL's overseas venture and pick up around 50 per cent stake in it.

Alternative plans

Since Coal Videsh plan has not taken off, the Ministry of Coal has already started deliberations on alternative routes, sources pointed out.

For setting up an overseas arm, initially the proposal needs to be approved by the Government and the Steel Ministry has orally conveyed its support to any such effort, sources said. The second consideration would be to decide in which country the company will be incorporated for which various taxation issues would have to be factored in, sources pointed out.

SAIL had been making unsuccessful efforts to acquire overseas coal blocks for close to three years now. The various countries where opportunities had been examined include Australia, Canada, Russia, Poland and Mozambique, among others.

As of now, close to 70 per cent of the coking coal used by SAIL annually is imported because of the high ash content of Indian coal. SAIL is also developing coking coal blocks in India with CIL subsidiary Bharat Coking Coal Ltd but the paucity of coking coal reserves in the country is the reason for the public sector steel maker to turn to overseas properties, sources said.

More Stories on : Steel | Overseas Investments | Steel Authority of India Ltd | Coal

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