Even as steel manufacturers and the government debate over issues related to pricing of steel, it is ironical to note that retail consumers of steel may still not get the same at the intended price. Even if the government was to control steel prices in the domestic market, it may only lead to further hoarding and black marketing of the commodity.

Says Neelkanth Mishra, an analyst with financial services group Credit Suisse, "If steel prices in India remain below the international prices, it may potentially lead to black marketing. People could buy from the domestic market at lower prices and sell at higher prices elsewhere."

Even now, the price of steel in India is Rs15,000 to Rs20,000 lower than international steel prices. They are also expected to remain firm for the next five to ten years on the back of demand from BRIC countries according to consulting firm McKinsey. In such a scenario, if new measures further widen the gap between domestic and international prices, it may just be the speculators and hoarders that benefit.

Mishra's view may also well be the truth if one takes the events of the past few months into consideration. The steel industry manufacturers raised the price of steel by Rs5,000 to Rs40,000 per tonne (nearly 15%), in May this year. But with inflation touching double digit, they were asked by the Finance Ministry to roll prices back. The steel industry rolled prices back by Rs4000 and also promised to hold the same price level till August. The present price of steel in July stood at around Rs36,000 per tonne.

However, the prices in the retail market continued to rise and have risen by nearly 30% in the meanwhile. An independent house constructor, C.P. Sharma says that steel has been especially rising since the past three months. Real estate developer and COO of Parsvnath DP Dhaka too agreed with Sharma. "Steel prices have increased in the past few months and have been affecting his construction cost," he said.

The Minister for Steel, Ram Vilas Paswan, blames the same on the middlemen and distributors. "The steel manufacturers have kept their promise by rolling back prices and holding the same for the past three months, but middlemen and distributors have not been performing their roles. They have not passed this decrease to consumers and have indeed been charging even more from them," he says. He has also warned steel retailers and distributors that if they charged higher prices, they will be persecuted.

However, steel retailing in Indian continues to be largely unorganised. Tata Steel managing director B Muthuraman points out that the large steel producers just account for 30% of the retail steel market. It will be indeed difficult to keep a tab on such a loosely knit group.

The London-based, ArcelorMittal has 27 manufacturing plants across the globe. China and India figure prominently in the company's global business strategy, he said, not explaining the diversification into the energy sector.

Speaking on `Creating Global Champions' in a special session organised by the Confederation of Indian Industry (CII) here on Monday, Mr Mittal said Asia at present would account for half of the global steel consumption. "The steel consumption in China is 500 million tonnes (mt) per annum with a growth of 10 per cent. We have a well-defined China strategy and have recently signed a pact to acquire a company in China," he said.

Observing that Indian steel consumption was much lower than that of developed countries, Mr Mittal said "There is tremendous scope for India in steel. We have a vision for the next 20 years and will be a player here too.". The coal mine allocation for the two plants in Orissa and Jharkhand were done and the ground-breaking would soon be done, he said.

On the rising steel prices, Mr Mittal said the reason was increased prices of raw materials.

"Since 2004, however, the steel industry has stabilised the prices to a greater extent," he said, adding that the market was not consolidated enough to decide raw material prices. ArcelorMittal has a market share of 10 per cent globally.

The largest chunk of the new jobs according to the surveywould be generated by hospitality sector which is riding highwith the tourism boom in the country. "The Hospitality sector will generate the maximum numberof employment in 2008.

426,668 jobs are going to be generatedby the Hospitality sector. This sector is closely followed byHealth at 295,829 and Education Training & Consultancy at166,005," says the survey.

It adds that an estimated USD 11.41 billion is expectedto be seen in the Hospitality sector in the next two years andthat India is likely to have around 40 international hotelbrands by 2011.

"The boom in the tourism industry has had a cascadingeffect on the hospitality sector, which was a result of theincrease in the occupancy ratios and average room rates. Withthe demand continuing to surge, many global hospitality majorshave evinced a keen interest in the Indian hospitalitysector," says K.

Pandia Rajan, Managing Director, Ma FoiManagement Consultants Ltd. While, IT and ITES sector continues with high growth inrecruitment at 7.

Concerned over the demand-supply mismatch in the steel sector, steel minister Ram Vilas Paswan will meet major producers of the alloy on Monday to assess their capacity expansion plans and discuss the impediments to investments envisaged at about Rs 3,00,000 crore by 2011-12. "The minister will meet leading steel producers on Monday to discuss the reasons behind the increasing demand-supply gap in the steel sector and take stock of their mega expansion plans. Paswan is also likely to discuss the bottlenecks impeding fructification of major investments in the country as we are envisaging an investment of Rs 2,80,000 croieby201M2," a top steel ministry official said. The meeting assumes importance as the ministry has also asked the concerned secretaries of mineral-rich states of Orissa, Jharkhand, Chhattisgarh, Karnataka, Madhya Pradesh and West Bengal to be present to apprise diem-selves of the issues raised by the steel makers and share their views on achieving the envisaged investments. This meeting is besides the inter-ministerial group (IMG) set up by the government and being headed by steel secretary Raghav Sharan Pandey to extensively delve into investment related issues. "The minister is particularly concerned that the demand-supply gap has caused 67% rise in steel imports,": die official said.

POSCO BEGINGS TO BUILD PIPE PLANT IN US

South Korea's steel giant POSCO has broken ground to build a $129-million plant to produce pipes in California, the company said on Sunday. The USP--jointly invested by POSCO, US Steel and South Korea's SeAh Steel -- will annually produce up to 270,000 tonnes of pipes for petroleum, it said. Posco, the world's fourth largest steel maker, and US Steel own a 35 per cent stake each in the new factory -- to be completed in Pittsburgh, California, by April 2009. The remaining 30 per cent stake is with SeAH.

COAL MAY FINALLY GET REGULATOR

THE government has set the ball rolling for the establishment of an independent coal regulator; a move mat is being seen as a precursor to opening the controlled coal market. Presenting the Budget proposals for 2008-09, the finance minister made an emphatic statement that an independent watchdog may soon oversee the activities in the coal sector. He, however, slopped short of opening up the sector for commercial mining by the private sector, a step recommended by the Economic Survey 2007-08. "Fifty-three coal blocks with reserves of 13,842 million tonnes have been allotted during April-January 2007-08 to government and private sector companies. A new coal distribution policy was notified in October 2007. A coal regulator will be appointed," the finance minister said in his Budget speech. The announcement assumes importance as proposals on a coal regulator have been floating for the last several years without any concrete results. Recently, the Central Electricity Authority suggested the CERC should be vested with additional powers to regulate the coal sector rather than putting in place a separate coal regulator. Even within the coal ministry, views have been expressed that a regulator will be important once the sector is thrown open to private players. Meanwhile, the coal ministry is finalising Coal Governance and Regulation Authority Bill that will establish the office of the new regulator responsible overseeing issues pertaining to pricing and supply of coal. The bill is being finalised on the basis of a report prepared by Administrative Staff College of India.

FUND TO BOOST INVESTMENTS IN T&D

Tata Steel and Corus, which revved up their integration plan, have already started discovering the benefits in several areas of research and steel making. Apart from the 15 R&D projects that the two sides have identified for fast-track implementation, there are several "harvesting projects" which could be exploited commercially by either side at a short notice. Around 50% of the projects being exchanged by the two sides are said to be "harvesting" projects, where each side puts the other's intellectual property rights (IPR) directly into use for production. "They have done something, we pick up from there. We have also passed on all our developments, including IPRs and patents for whatever projects we have done in recent times to them. So, they would also be making use of them," Tata Steel chief technology officer (CTO) T Venugopalan told recently. Tata Steel has separate R&D and technology groups whereas Corus has a combined research, development and technology (RD&T) team. "The integration is going quite well", said Venugopalan, adding there could be no time frame for it as it was a continuous process. Among several projects ready for Corus takeaway was one on "hydrogen harvesting". Tata Steel has developed a process of cracking water into hydrogen and oxygen by way of sprinkling water on hot slag. While the heat in the slag will otherwise have gone waste, hydrogen released in the process can now be collected for future use as fuel. "We started doing the project and had made some progress; now Corus also has taken up the project," added the Tata Steel CTO. Likewise, Tata Steel has pioneered to develop a very contemporary grade high-strength steel, which it calls HS-800. Corus has also tested HS-800 and declared it to be "far superior" to most of the 800 tensile strength grades it has been producing. Having received all the know-how required to produce HS-800, Corus would now have to develop it and put it in the marketplace. "They would first of all see the market by producing a small tonnage," said Venugopalan. Similarly, Corus has advanced technology when it comes to 'metallic fuel tank grade steel. Tata Steel is going to develop the 'fuel tank' grade steel in this country, using the knowledge available with Corus.

STEEL MAKERS SEEK 100% DUTY ON EXPORT

Indian steel manufacturers have sought higher export duty on iron ore, rising of customs duty on flat products to curb steel imports and withdrawal of customs duty on project imports for steel plants in India. The Indian Steel Alliance (ISA) has suggested an increase in export duty by 100% to Rs 600 a tonne in the budget for 2008/09 to discourage Indian exports of iron-ore, which have risen 9% over the last six months. "Increased appetite of Chinese imports has led to an alarming rise in the spot price of iron ore. The un-abated exports of iron ore are putting an enormous pressure on reserves," the industry body said. The ISA counts Steel Authority of India Ltd, JSW Steel Ltd, Ispat Industries Ltd, Jindal Steel & Power Ltd, and Essar Steel Ltd among its members. India is emerging as a major destination for steel making facilities due to availability of higher quality iron ore.

PANEL TO ASSESS CHIRIA MINES, SAIL'S NEEDS

The Centre and Jharkhand government will set up a high-powered committee to assess the quantum of reserves in Chiria iron ore mines and make a realistic projection of steel giant SAIL'S need of the mineral hi view of its expansion plans in the mineral-rich state. The move is expected to resolve the current impasse over the world famous Chiria mines.

CHIEF OF JINDAL STEEL'S BOLIVIA UNIT SUSPENDED

Empresa Siderurgica Mutun, a company set up by the Bolivian government and Jindal Steel and Power, has temporarily suspended its president Walter Chavez on accusations of poor administration. An investigation began this week to determine if Chavez should be fired. The key accusation against Chavez is to have missed meetings and hired or fired employees without the board's approval, Steel Business Briefing reported quoting a Bolivian mining ministry insider.

GLOBAL COAL PRICES ZOOM

LIBERALISE LOCAL PRODUCTION, END IMPORTS

THE sharp rise in the global spot price of coal highlights the folly of India planning to use imported coal for part of its future power generation. Spot coal prices have shot up to $140 per tonne in Australia and $123 per tonne in South Africa. Therefore, long-term contracts between Japanese utilities and Australian producers will probably be signed at $110 per tonne next year against just $55.6 last year. The latest price spikes was caused by a number of supply disruptions happening together, yet it seems certain that the days of cheap coal are over. When the first two ultra-mega thermal stations were put up for auction, the lowest bid for Mundra, based on imported coal, was Rs 2.26 per unit. However, the lowest bid for Sasan, based on captive domestic coal, was just Rs 1.19. Why continue with import-based projects when the local alternative is half the cost? Subsequently, the lowest bid for Krishnapatnam was Rs 2.336. These are levelised tariffs, which means that the actual rates will be much higher over time. Besides, the contracts have escalation clauses linked to world prices. So, the sharp rise in world prices means much higher power tariffs. Coal imports may be unavoidable in countries without coal. But India has the third biggest coal deposits in the world. Coal India is not up to the job, so we must open up coal mining to the private sector. The Left has refused to allow the law to be amended to this effect. So the government has given liberal interpretation to a loophole that allows captive mining for private sector projects. This is not enough. All ultra-mega power projects should now be based on cheap domestic coal, Projections suggest that 50 million tonnes will be imported by the terminal year of the 11th Plan, of which one-fifth to one-third will be thermal coal. Such imports were initially justified on the ground that imported coal had a low-ash content and was economic for southern coastal locations. That has ceased to be true with the explosion in world prices. We must rethink our entire coal strategy.

STATES' HELP SOUGHT FOR POWER CAPACITY ADDITION

In view of the slow progress in project implementation, the Centre has sought support from various states to achieve a capacity addition of 78,5 77 mw in the 11th Plan period. States have been asked to expedite the process of issuing letter of awards for projects aggregating 11,125 mw in the state sector and 2,562 mw in the private sector. States have been asked to develop an effective mechanism to ensure timely implementation of state and private sector projects in step with the Centre's initiative to put in place a similar mechanism. The power ministry sought states' support at the meeting of chief secretaries of states and union territories convened on Tuesday. Of the 78,577 mw, a capacity of 39,865 mw is expected to be added by the centre while states are likely to add 27,952 mw and the private sector 10,760 raw. So far, 5,865 raw of projects, comprising 3,385 mw from states have already been commissioned. Projects with a capacity of 50,658 mw are under construction while the letter of award is yet to be placed for a capacity addition of 22,054 mw. Power ministry sources told that the Central Electricity Authority's (CEA's) assessment has said of the 78,577mw, orders for 10,432 mw are yet to be placed in the state sector and 1,932 mw in the private sector.

IRON ORE EXPORTERS PROPOSE PRIVATE PORT NEAR TADRI

Tata Steel has signed a wage settlement agreement with the Tata Workers' Union. Under the agreement a monthly amount of interim relief will be paid to the employees of Steel Works and Tubes Division, pending finalization of wage revision. The settlement will cover all permanent employees of the company at Jamshedpur, including Tubes Division.

JSW TO INVEST RS 80 CR TO INCREASE PRODUCTION

JSW Steel said it would invest Rs 80 crore to increase production of galvalume, a zinc-aluminium alloy coated steel sheet, to six lakh tonnes per annum by September, The company began production of galvalume in January at its Vasid facility in Maharashtra touching a capacity of 1.5 lakh tonnes per annum. "We would be investing Rs 75 crore to Rs 80 crore at our Tarapur facility in Maharashtra to increase our production to five lakh tonnes to six lakh tonnes of galvalume per annum," JSW Steel Senior VP Jayant Acharya said.

10% TAX LIKELY ON IRON ORE EXPORTS

Major suppliers India may next week overhaul duties on iron ore exports, government and trade officials said, possibly forcing producers to pay more and fuelling a further rally in record spot prices. A steel ministry official said on Tuesday his ministry had proposed a 10% tax on the value of exports to replace fiat rates, under which high grades pay duty of Rs 300 per tonne against Rs 50 for lower grades. The move appears to be a nod to local steel mills that are expanding and say booming exports to China must be slowed to ensure future supplies of ore at home. 'An ad valorem duty seems more reasonable for iron ore exports because the current rates are too low," said the ministry official, who did not wish to be identified. Steel ministry officials want the move to be included in the federal budget on February 29, but a final decision rests with the finance ministry, which will also have to overcome resistance from the powerful mining lobby. "I believe that the government is considering a rise in export duty rates (on iron ore) to advalorem. It looks like it may happen," said AS Feroze, an independent steel and minerals consultant. Most of India's ore exports are of lower and medium grades, At current rates, ores of 63.5% iron content would be taxed at a significantly higher Rs 5 00 per tonne. The official said the steel ministry has also proposed that export duty be with drawn from iron ore pellets, which are made by concentrating fines or powdery raw material, as it involves added value, rather than simply shipping the mined output.

SIVA EYES COAL AND IRON ORE MINE

ACQUIRES NORWEGIAN SHIPPING FIRM FOR Rs 1, 200 CRORE

NRI businessman Sivasankaran, who is known to spot a new business successfully, is now in the last leg of discussions to acquire coal and iron ore mines. As a prelude to this entry he announced the acquisition of a Norwegian shipping firm for Rs 1,200 crore in an all cash deal. Speaking to TOI from Singapore, Siva Ventures chairman C Sivasankaran said, "We have concluded the acquisition of J B Ugland Shipping, which has a fleet of 40 vessels for $300 million. It is a 100% buy-out of the existing shareholders of the company As regards, the coal mines and iron ore mines, I cannot comment now." Sources said he is close to announcing coalmine acquisitions in Indonesia and iron ore mines in Brazil. "Discussions with sellers are at an advanced stage, that is all we can say," they said. The logic of buying the shipping company is simple: "We will need ships to move iron ore and coal. This acquisition which we announced today is a piece of the whole puzzle. Freight rates are skyrocketing. In the past 18 months, dry bulk cargo rates which were transported at $16,000 a day, is now being charged $50,000 a day," sources added. A company statement said the transaction was agreed in January and closed on February 15. "We are not disturbing the current management. They will continue to run the business. Ours will be more of a financial investment," V Srinivasan, group CEO of Sterling Infotech (the holding company of Sivasankaran's businesses), said. As part of the negotiated deal the company has the right to use JBUS brand name for three years and will continue trading under JB Ugland name following the acquisition. For 2008, the target company is likely to earn $150 million in revenues. "These are asset based companies, and very profitable now. We can't reveal profitability numbers as yet," Srinivasan added. JBUS has a fleet strength of 40 vessels with an aggregate capacity of around two million dead weight tonnages.

COAL INDIA, IL&FS ARM IN PROJECT DEVELOPMENT SPV

Hunan Valin Steel Tube& Wire Co., part-owned by the world's largest steelmaker Arcelor Mittal, said it reduced steel production by 410,000 metric tonne as the worsts now storms in 50 years cut power supply. The cut would have a "big, negative" impact on the company's profits in January and February, the Changsha, Hunan province-based company said in a statement posted on the Shenzhen stock exchange on Monday.

MILLALIC MAGIC

LAKSHMI MITTAL BUILT THE WORLD'S BIGGEST STEEL FIRM FROM SCRATCH--AT INTERNET SPEED

FROM his grand top-floor office in Berkeley Square, Lakshmi Mittal commands a westward view over London's West End to Kensington Gardens, where he lives in one of the city's swankiest houses. The giant swimming pool in its basement is one reason why the leader of the world's steel industry, and Britain's richest man, looks so fit and relaxed. Born in India, Mr Mittal has long made London his home and first came to notice there in 2002 when Tony Blair, the prime minister at the time, controversially put in a good word for him in a Romanian deal. When he made his sudden and spectacular appearance on the European business scene in early 2006, Mr Mittal was still a relative unknown. French government ministers, frightened by his takeover bid for the largely French Arcelor steel firm, did not know whether they were under attack from America or India. The answer was neither: Mittal Steel was a company from everywhere and nowhere, which helps to explain why its integration with Arcelor to form Arcelor-Mittal, the world's largest steelmaker, went so' surprisingly smoothly. Most mergers fail: from AOL Time Warner to Daimler Chrysler, the corporate landscape of the past decade is littered with wrecks. Just as surprising was the way in which Mr Mittal managed to overcome opposition to the deal from the business establishment and the French government -- and has now gone on to increase profits in the new firm's first full year. On February 13th Arcelor Mittal announced that it had made $19.4 billion, before tax and interest, on sales of $105 billion in 2007-- up 27% on the two firms' aggregated profits in the previous year. Mr Mittal's 43% stake makes him the world's fifth-richest man, with a fortune of some £19 billion. It helps, of course, that Mittal Steel made its move on Arcelor--a European champion forged in 2001--just as steel prices were heading for record levels, driven by Chinese demand. Mr Mittal was not the only one thinking of global consolidation in late 2005. Arcelor was fighting with ThyssenKrupp of Germany over Canada's Dofasco. Corus, the firm formed by the union of British Steel with a Dutch firm, Hoogovens, was looking for a strategic buyer, and ended up choosing India's Tata over Brazil's CSN. And Mittal Steel itself (then 88% owned by the Mittal family) had just bought International Steel, a collection of bombed-out American mills, overtaking Arcelor in the process to become the industry's number one. So Mr Mittal was already leading the race to consolidate the industry at the time of the Arcelor deal, which confirmed him as the winner with the creation of a new giant that accounts for one-tenth of world steel output. The Arcelor Mittal merger went so smoothly, Mr Mittal explains, because the two companies had been formed as a result of some 50 smaller mergers between them. Having survived all these previous deals, the firms' managers were not afraid of change. Arcelor was the fusion of Arbed in Luxembourg, Usinor in France and Aceralia in Spain. The origins of the Mittal steel empire were less obvious. The Mittal family had a steel business in their native India, but felt expansion was constricted by regulation and the presence of both a state-owned rival, SAIL, and a private national champion, Tata Steel. So Mr Mittal's father helped him start a steel mill from scratch in Indonesia in 1975. The trick he learned there was to move into steel-making using imported direct-reduced iron (DRI) pellets instead of more expensive scrap or imported steel billets. The younger Mittal's emergence onto the world steel scene was not part of some global vision, but was the result of opportunism, a bold eye for a deal and an ability to turn round failing firms. His supplier of DRI was a struggling state-owned steel firm in Trinidad. When the Trinidadians spotted Mr Mittal's success in Indonesia, they invited him to turn their firm around under contract, and he eventually bought it in 1994. At around the same time he acquired another DRI steel plant in Mexico, and two more in Canada and Germany. All of these were distressed assets that governments wanted to offload. By the end of the 1990s the brash newcomer from Kolkata byway of Jakarta was even picking up assets in America, where the rust-belt steel firms were going into decline, and in Eastern Europe, where governments were keen to privatise loss-making state-owned firms. Today Mr Mittal's firm owns one Chinese steel company and holds a stake in another. The steel giant thus straddles the developing world (with opportunities for growth) and the developed world (with scope for consolidation).

BOLDNESS BE MY FRIEND

Last summer Arcelor Mittal launched its new corporate identity with a lavish party at the Musee Rodin in Paris. The company's motto ("Boldness changes everything") is no empty boast, but a neat reflection of the way Mr Mittal's deal making created a world-leading steel giant from virtually nothing in barely a dozen years. People expect that sort of thing in Silicon Valley--but not in mature industries like steel. Can Arcelor Mittal continue to grow and thrive? One potential threat comes from the consolidation of iron-ore suppliers: if BHP Billiton succeeds in its bid for Rio Tinto, the combined firm would have over one-third of the freely traded market. But Mr Mittal already has in-house ore supplies to cover half his needs and expects this to grow to three-quarters in a few years. Another challenge will be to carry out rationalization in Europe in the face of political opposition. After a summons from President Nicolas Sarkozy, Mr Mittal has agreed to review plans to close a plant in northeast France. But perhaps the biggest test of all will be to cope with the emergence of China as a steel exporter. Its steelmakers may be protected and inefficient now, but sooner or later rationalization and greater technical skill will produce big firms that can make cheap steel. China's rapid development, hitherto a huge boon for Mr Mittal, may yet turn into a threat.

UP TO SIGN PACTS FOR 6,000 MW POWER PLANTS

JOINT VENTURES WITH NTPC & NEYVELI LIGNITE TO ENTAIL INVESTMENTS OF RS 30K CRORE

CHINA'S LARGEST STEELMAKER PICKS UP 35%

BAD Steel of China has picked up 35% in a JV with Visa Steel Limited. The new company. Visa Bao limited, was incorporated earlier this month. It will help Bao Steel China's largest steel maker, gain a foothold in the ferro chrome business. The move marks the first foray by a leading Chinese steel company in the Indian market. It also coincides with a steep hike in ferro chrome prices in the world market. Ex-plant prices have shot up by almost 30-40% from Rs 50,000 to Rs 65,000-70,000 per tonne in recent months. "Visa Bao Limited was in corporated on February 1. Our partnership with Bao Steel is significant since it will help us produce and export value-added ferro chrome," Visa Steel MD Vishal Agarwal told. The Visa group will have a 65% holding in Visa Bao through Visa Steel (51%) and Visa Comtrade, a group arm. The latter will hold the remaining 14% of the shareholding in Visa Bao. Visa Bao plans to set up a ferro chrome plant with a capacity of 1-lakh tonnes per annum. Globally, China is one of the largest consumers of ferro chrome, some 25-30% of which finds use in the making of stainless steel. Visa Steel is setting up a 50,000 tonne ferro chrome unit and a 0.5 million tonne special and stainless steel facility in Orissa. The dynamics of the ferro chrome market have changed in the last few years, prompting large producers to look for opportunities in India, In production of ferro chrome, power costs account for a hefty 50-60% of the total cost. However, the power situation in China has forced the country to discourage power-intensive industries, As a result, from an exporter of ferro chrome, China has turned into a net importer in the last few years. Given this scenario. Visa Bao is, thus, eyeing a meaningful slice of the export market for value-added ferro chrome.

CIL EYES EUROPEAN TIE-UP FOR MINING VENTURE

IN TALKS WITH SEVERAL CHINESE COS TO BUY TECHNOLOGY TO OPERATE UNDERGROUND MINES

PUBLIC sector unit Coal India Limited (CIL) is in talks with MMD Asia Pacific, a European mining company with strong presence in China, for a possible venture in underground coalmines. It is also talking to several Chinese firms for acquiring technology to operate such mines. "MMD Asia has contacted us to join hands in development of our underground coal mines. They arc also keen lo bring in several other Chinese companies for possible collaboration. We are interested in forging alliances with Chinese and Australian companies for underground mining/' CIL chairman Partha S Bhattacharyya toId. Such initiative would, however, be taken forward through the competitive bidding route. "The process will be started once Central Mine Planning & Design Institute (CMPDI) completes the geological survey of underground mines," he added. CIL is looking at overseas partners for underground mining as most of its operations in this area has become unprofitable and production has declined. Out of about 285 underground mines with CIL, only 38 are making some profit and others are in losses. Moreover, the production from such mines has also declined to a mere 43.42 million tonnes in 2007. "We cannot ignore underground mines since they are in loss. Production from such mines are important to sustain coal production in the country. The open cast mines may not last long," said Mr Bhattacharyya. The proposed collaboration with Chinese companies may take the SPV route. CIL is considering to float a SPV with overseas mining companies for initiating production from underground mines. However, such collaboration may also be restricted to individual projects. CIL's interest in Chinese companies is in recognition of technological prowess the country has developed in underground mining. The mines in China not only yield more coal but also use the best of technology. CIL and Chinese companies already had an initial round of talks during the recently concluded Mining Congress in Kolkata. At the Congress, several companies had expressed their keen desire to participate in lndian coal mining activities. As commercial mining is not open to private sector at present, such companies would have to restrict their participation through CIL. MMD Asia Pacific had also participated in the Congress and had not only offered its services but promised to bring a lot of Chinese companies to India.

COMMERCE MINISTRY SEEKS MMTC, SAIL OPINION ON NINL MERGER

The Commerce ministry has initiated talks with NINLs major stakeholder MMTC and its key suitor SAIL, asking them to express their views on the proposed merger between the two public-sector steelmakers, "In a meeting held earlier this month, the top brass of the commerce ministry asked both MMTC and SAIL to present their views on the proposed merger," a senior government official said. MMTC and the Industrial Promotion and Investment Corporation of Orissa (IPI-COL) jointly promote NINL. MMTC Limited owns the majority stake in the steel company, while the Orissa government owns 26.29% through IPICOL and Orissa Mining Corporation. IDBI Capital stalled the merger after the Orissa govemment last September conveyed its disagreement on NINLs valuation. The commerce ministry officials were understood to have pointed out that valuation of the company could not be anirnpediment for the merger as the stakeholders and suitors could mutually agree that upon. The steel ministry has also sought the consent of Orissa government and MMTC on the valuation to facilitate the merger and circulated draft note for the consideration of the committee of secretaries. Meanwhile, sources said that Rashtriya Ispat Nigam Ltd is also understood to have expressed its keenness to merge NINL with itself saying the merger would create a greater synergy between the two, besides ensuring raw material security for both the state-run firms.

ARM- TWISTING IN STEEL

REFORM THREATENED BY POPULISM

THE steel minister, Mr Ram Vilas Paswan, has "persuaded" steel companies to reduce the price of steel varieties by Rs 500-1,000/tonne. The industry and minister both claim that this was entirely voluntary, though nobody believes it. Rather, the industry was unwilling to stage a confrontation for fear of paying a penalty if it did so. In a market economy, a rise in prices is the logical outcome of rising demand compared with supply. Price signals are required to influence investment and consumption: rising prices tell producers to invest more, and consumers to conserve use of steel. But such market logic was irrelevant when Mr. Paswan met the steelmakers. He believed that he as minister had the right to decide what price was reasonable or otherwise, and felt the latest price hike was unreasonable. The industry resorted to stratagems like saying they had to raise steel prices because of the rise in the prices of inputs like iron ore, coal and transport. This was the old cost-plus logic of the licence-permit raj, revived to deal with a minister who clearly wants to go back to the old days. He has shown the same command-and-control attitude in relation to price control in drugs: he wants to bring up to another 300 drugs under price control. Mr Paswan is not alone. Not long ago, Tamil Nadu CM Karunanidhi threatened to nationalize cement units in his state unless they cut prices. Rather than risk a confrontation, the cement producers agreed to make some supplies at a concessional price. In Goa, the CM has decided unilaterally to abolish all SEZs, including those officially notified, even though this arbitrary action has no legal basis. In short, Indian politicians have made it clear that they have no respect for economic reform when things get politically inconvenient. The recent populist events may look like minor aberrations in a substantially liberalised economy. Yet they signal a warning that the political class has accepted market reform with considerable reluctance, and that populism will constantly threaten economic liberalism.

JHARKHAND RECOMMENDS MINES ALLOCATION TO ARCELOR MITTAL

The Jharkhand government is understood to have recommended to the mines ministry allocation of two iron ore mines in the state to Arcelor Mittal for its proposed 12 million tonne steel plant. The two mines, with total reserves of 600 million tonnes, are located at Meghataburu and Karampada. The world's largest steelmaker has identified the site at Torpa-Kamdara lo set up the plant. Sources in the know said that the recommendation from Jharkhand has been made recently, but there was no mention of the Chiria mines, which Arcelor Mittal was vying for. Arcelor Mittal will shortly be going for the Detailed Project Report for its proposed plant in Jharkhand, Meanwhile, the company has received a provision from the Orissa Government to acquire 7,500 acres of land at Keonjhar for a 12 million tonne steel plant in that state. The company intends to use 6,000 acres to put up the steel plant, 1,000 acres for setting up the 1,500-mw power plants and the remaining for developing a township.

STEEL AND BANKING POSITIVE, AUTO WEAK

The shares of steel companies are likely to post further gains next week, taking heart from remarks that the country will be able to sustain a 9 per cent economic growth rate despite the global jitters. Prime Minister Manmohan Singh said that India would be able to sustain 9 per cent growth although it is not fully insulated from the global economic slowdown. Steel stocks are also likely to surge on hopes of budgetary sops. The steel companies are battling high input costs as sea freight rates and prices of iron ore, coking coal and ferro alloys surge.

BANKING: LOOKS STRONG

The banks are likely to trade in the positive territory next week despite many banks cutting their lending rates. A cut in lending rates is seen as negative for banks as it has a bearing on their interest income. However, banks' decisions to cut lending rates were triggered by decline in the cost of deposits in the current quarter, analysts said. State Bank of India, the country's largest lender, reduced its benchmark prime lending rate by 25 bps to 12.5 per cent on Monday, which prompted a series of banks, including private sector Axis Bank, to cut lending rates. The other factor that led the banks to cut rates, according to analysts, was Reserve Bank of India's decision to keep key policy rates unchanged at the third quarter review of its monetary and credit policy for 2007-08 (April-March) on January 29.

IT: FLAT

The information technology heavyweights are likely to be flat next week amid uncertainties on what the Union Budget has in store for the sector and lingering worries over a slowdown in the US. Analysts said IT companies may see a slowdown in first two quarters of 2008-09 (April-March) on lower demand from US, which contributes 55-60 per cent of their revenues. Infosys Technologies' earnings guidance for 2008-09 will give a direction to the investors, analysts said. It has reduced its exposure to the US market to 62.3 per cent from 80 per cent. The shares of TCS are likely to see a negative trend next week, with a strong resistance at Rs 823, said Imtiyaz Qureshi, technical analyst, India Capital Markets. Satyam is likely to trade in the range of Rs 412-461 next week and HCL will become attractive only above
286, Qureshi added,

AUTO: WEAK

Automobile counters are seen weak next week, albeit with some muted gains, in line with the broad market indices. The sentiment would continue to be down as sales are not expected to revive in the Jan-Mar quarter," analysts said. Hit hard by higher interest rates and reluctance of finance companies to support sales in rural areas, particularly in northern India, the domestic bike market is f acing are cession, with the numbers going down by as much as 12.4 per cent in the April-January period.

JSW GROUP TO SET UP PORTS, AIRPORTS & SHIPYARDS

IT's PLANS ARE CENTERED AROUND SUPPORTING ITS DIVERSIFIED PORTFOLION IN STEEL, POWER, ETC

JSW Infrastructure & Logistics has drawn up a mega plan for developing a slew of seaports, airports and shipyards in various parts of the country, some of which are already in the process of taking shape. This follows their ambitious Jaighar project where the company is developing a shipyard and a port scheduled to be commissioned within next two years. The plan is to support the group's steel, power and other downstream projects, and provide a logistics backbone. "We are going to develop a port in Kakinada, Gujarat and West Bengal," said Capt BVJK Sharma, director of JSW Infrastructure & Logistics. "The port in West Bengal will meet the basic requirements of the 10-million tonne steel plant which is being set up there. Once the plant comes up, we will set up a cement and power plant as well, which is a natural offshoot," he said. "Since we need a port in West Bengal we are trying initially to tie up with Dhamra Port and simultaneously developing our exclusive captive port in West Bengal. We have been in discussion with the Tata's for our long-duration cargo contract. We are looking for a gateway for moving bulk cargo to and from our West Bengal and Jharkhand projects mainly being coal, coke, limestone and the export of steel, etc. Our objective is to have deep-water ports capable of handling capesize and even larger vessels," said Capt Sharma, JSW group is developing a ship repair and ship building project at Kakinada with an investment of over Rs 1,000 crore. In Gujarat, it is building a 1,200-mega watt {mw} power plant at Simar and has also requested the government for permission to build a captive port. It would be set up at a cost of Rs 800 crore. In Andhra Pradesh, the company is looking for a tie-up with the Gangavaram port. In case this proposal does not come through, they plan to build their own captive port. Capt Sharma did not want to indicate the investment that would be involved in the West Bengal port project. According to an official, the company has three divisions which are actively involved in setting up a railway corridor, mega-township, undertake water supply management, sewage treatment plant and air cargo handling. The company also has plans to enter into inland water transport in a big way and will set up a railway corridor for connectivity between Ramagiri and Jaigarh. The Jaigarh shipbuilding and repair facility involves an investment of Rs 250 crore, as much of the infrastructure and the land is already available. "We will set up a number of greenfield airports in various cities like the one we have in Bellary where private operators such as King fisher and Air Deccan besides our own aircraft already operate, "said Capt Sharma. "With regard to ship building, we are in the process of entering into an agreement with a foreign major for establishing a tie-up and if all goes well, the agreement will be signed soon." He however declined to name the foreign party.

ANDHRA DECIDES TO TAP OTHER POWER SOURCES AS CERC HIKES UNIT PRICE

Orissa government on Saturday successfully completed socio-economic survey and land demarcation in one of the three-gram panchayats located in the proposed plant site of Posco near here, official sources said. Jagatsinghpur district collector PK Meherda said the survey and land demarcation work at four villages in Gada Kujang gram panchayat area was completed by this noon. "A total of 1,035 families were surveyed since February 7," he said adding efforts were on to extend activities to two other gram panchayats of Dhinkia and Nuagaon. Survey team comprising 60 revenue department officials were planning to begin survey work from Matha Sahi village under Nuagaon gram panchayat Officials of the works and housing department are accessing types of houses in the plant site.

STEEL PRICE HIKE: TIME TO ACT DECISIVELY

The hike in steel prices in India did not come as a surprise to anyone familiar with the industry globally. However, the quantum of the increase or maybe the timing of it, may not have gone down very well with the government, which has responded with a promise of a review through an institutional mechanism set up recently outside the framework of pricing control. Formal price controls are gone along time ago. If steel is deregulated and the market is allowed to play its role, the government should be bothered about a specific instance of price increase and plead the industry not to do so. If the government is concerned about high steel prices and its implications on the rest of the economy it has several instruments it can use effectively to either mitigate the impact of a price hike or force the steel makers to reduce the same. The government can waive import duty on steel. It need not calculate revenue losses, even if there is any. It can impose an export tax (mentioned only as a theoretical possibility but not recommended at all in this column) or take many measures to ensure drop in the costs of raw materials and energy such as reduction in their import duty rates. If the steel makers are responding to a global rise in steel prices in a globally integrated market, it is part of the market dynamics. However, what the government needs to look at is if such actions of the industry are derived from cauterization within the industry and whether the policy framework provides scope for unfair trade violating the basic competition issues. High steel prices in the first place indicate shortages. Supply response to steel demand in India (as also worldwide) has been lethargic. The current trends in the steel market make investment in this country extremely attractive. There is rush for it. The list of projects seems to have no end. Yet, those who have managed to put up a respectable show in terms of progress are a small lot. The government has a major role to play here. This is known to all and it is definitely playing a role. What is important here is, however, to play that role correctly and in a way that shows results. The problems are well known. It is not important to list them out, but, to see what can be done to take care of them. India needs steel - huge quantities of them. If the domestic industry is not in a position to supply them, let imports be welcome till the time it adds sufficient capacity. One should feel happy if one finds China exporting more steel rather than get into a panic and rush for protection. Forget antidumping. Steel is not an essential commodity any more, but is important to the economy, especially at this stage, where the country needs massive infrastructure development and housing for the people. At current prices of steel, many of these infrastructure projects will be unduly delayed, scrapped or wait for a long time to complete with time and cost overruns. The cost to the nation will be pretty high. It is not time to plead for concessions. It is time to act effectively and decisively.

JINDAL URBAN WINS FIRST DEAL IN DELHI

THE Delhi-based Jindal Urban Infrastructure, a unit of Jindal SAW Ltd, has won the Capital's Rs 200-crore, first waste-to-energy turnkey project. The project aims at generating 16 MW of power from waste. The power plant will use about a third of daily waste, which stands anything between 6,000 and 8,000 tonnes per day. This project is also the first of such nature to be registered with UNFCC for carbon credits. Even though the waste-based power plant has a high capex, the zero fuel cost would bring down the cost of power so generated considerably. Even the location of the project within the confines of the city -- across IS acres of land in Okhla and Timarpur -- would keep the transmission cost low. The project will bring light to more than 6 lakh homes by 2010. "India needs more power and using waste to produce energy helps the society solve two pressing problems in one go," said P R Jindal, vice-chairman and promoter, Jindal Saw. The investment, including the equity capital already invested in the business, plus projected debt financing, which ihe group expects to apply within the next 12 months, with the total investment in the Jindal ITF units, is expected to touch Rs 700 crore. "These are capital intensive businesses, yet we're planning to develop them the way Jindal SAW always has -- by making sure we have the lowest cost capital structure of anyone competing with us. That will require financial engineering work and potentially bringing in equity partners for a minority stake. But we're comfortable with that -- we always want to maintain a conservative risk profile. We're prepared for any bumps on the road," said Indresh Batra, vice-chairman and managing director, Jindal Urban Infrastructure. The project attracted more than 30 power giants such as Tata Power, GMR Energy, GVK Power, BILT Power, Gammon Infrastructure and Ramky Environs Engineers, to name a few. In fact, the refuse-derived fuel from all kinds of waste, including bio-degradable, non-degradable, recyclable, non-recyclable and even broken glass, will be burnt in a boiler to generate power.

BHEL BAGS POWER CONTRACT IN UP

State-run Bharat Heavy Electricals Limited (Bhel) has secured a contract for setting up two units of500 mw each at Anpara D thermal power station (IPS) in Uttar Pradesh. Valued at Rs 3,390 crore, the order has been placed on Bhel by Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL). The units are sated for commissioning during 2011-12. According to a Bhel release, its scope of work in the present contract envisages design, engineering, manufacture, supply, erection and commissioning of boiler turbine generator package along with associated auxiliaries, balance of plant and civil works. Bhel said it has already commissioned over 10,000 mw of power generating sets in the state, which include thermal, gas-based, nuclear and hydro units of various ratings. For UPRVUNL, Bhel is also presently executing orders for setting up 2 units of 250 mw each at Parichha TPS extension and Harduaganj TPS. According to the company it has established technology for manufacture of thermal sets up to 600 mw rating and has the capability to manufacture sets up to 1000 mw rating. So far, orders for 64 of 500 mw rating sets and 1 number of 600 mw rating set have been won, of which 33 have been commissioned. Further, Bhel said that it was now poised to introduce 800 mw thermal sets with supercritical parameters using Indian as well as imported coal. In addition, the company is shoring up its capability for higher rating hydro sets and advanced class gas turbines to cater to upcoming marker requirements. The company said it plans to further enhance its manufacturing capacity to 15,000 MW per annum in the next two years at a total investment of Rs 3,200 crore.

IEEMA DEMANDS INFRA STATUS FOR POWER SECTOR

Steel heavyweights including Arcelor Mittal Stainless, Nickel Alloys, Germany's Auerhammer Metallwerk GmbH and India's Shivalik Bimetal Controls Ltd on Thursday announced to set up a joint venture to manufacture and market clad metal products across the world. The three companies would invest Rs 50 crore in the new venture 'Innovative Clad Solutions' with a one-third -equity participation each. Clad metal technology provides a method of combining two or more metals into composite metal systems having mechanical, physical and surface properties designed to meet specific application requirements. The Rs 2,000-crore global metal cladding industry would provide need-based solutions to industries like telecom, transportation, marine engineering, chemical engineering, defence, and electronics housing. The industry is poised to grow at 60% per annum over the next five years. The company has already identified 25,000 square metres of land in Indore, Madhya Pradesh, to set up its manufacturing facility. The plant is likely to be operational within the next 15 months and would produce heat exchangers for automobiles, cable shields, cook-ware, batteries, building and roofing materials, and equipment used in marine application. "This partnership would help rewrite the concept of metallurgy in India. The new company would provide innovative application solutions based on the R&D capabilities and would sell the products in over 40 countries across the globe," chief executive officer, Arcelor Mittal Stainless and Nickel Alloys M Chaboud said.

STEEL COS COLD-ROLL PASWAN'S PRICE-CUT PLEA

STEEL prices are expected to increase again next month even as steel minister Ram Vilas Paswan has called for a meeting with all integrated steel producers on February 11 to discuss downward revision of prices to pre-February levels. The price increase could be in range of 5-6%, or Ks 1,000-1,500 pertonne. This is in addition to the Rs 2,000-2,500 pertonne hike in steel price earlier this month. Steel companies had hiked prices in January too. "Steel price may have to be revised again in the wake of continuing rise in the prices of inputs such as iron ore, coking coal, coke, scrap and ferro alloys. If we look at input price rise in the third quarter, steel price should have increased by over $200, or Rs 8,000, per tonne. The industry has been able to absorb less than half of the rise so far, "an official at a leading steel company said. Forming a joint front, leading steel companies including Tata Steel, SAIL, Ispat, Essar and Jindals have informed the steel ministry mat a downward revision of prices would be difficult at this point. Tliis is expected to be reiterated at the its meeting with steel minister on February 11. "The incredible escalation in the raw material prices have put heavy pressure on the steel industry margins. Steel industry has no control over this escalation, if the industry has lo survive to serve the nation; these cost increases have to be shared. Otherwise, the long term future of the steel industry will be in jeopardy," Indian Steel Alliance (ISA) president Mr Moosa Raza said. The increase has become imminent in the wake of $60 per tonne price rise in iron ore available from merchant miners who supply ore at spot prices (China spot price $150 per tonne) to domestic steel consumers. This, as per an independent industry assessment, has impacted the cost of finished steel production by $70 pertonne during the period. Moreover, NMDC has announced a price hike of 47.5% with retrospective effect from October 1,2007. Along with iron ore, coking coal price has increased from $160 to $220 pertonne during the third quarter. This has pushed up the cost of steel production by $50 per tonne, the steel industry claims. Steel scrap--used by induction and electric arc furnaces as input--prices have also shot up 36% while coke--obtained from coking coal for use in furnaces --prices have increased from $290 per tonne to $500 per tonne during the third quarter. Ferro alloys, ferro manganese and silico manganese, used to convert pig iron to steel, have also registered steep increase in the prices ranging between 40% and 50%.

NTPC, BHARAT FORGE TO MAKE POWER PLANT MACHINERY

State-owned power company, NTPC Ltd and auto components major Bharat Forge have decided to jointly invest Rs 3,000 crore towards setting up .of a new greenfield manufacturing facility for supplying plant and machinery for power projects in India, A Memorandum of Understanding (MoU) for floating a joint venture company was executed between CMD of Bharat Forge, Baba Kalyani and CMD, NTPC, T Sankaralingam was the first to report about this development on December 6, 2007. To begin with, the joint venture--49% of which will be owned by NTPC -- will manufacture casting of forgings, fabrication work and pipings for power projects (also called the balance of plant works), Sankaralingam told reporters at a press meet, Company officials revealed that at a later stage, the joint venture could also get into manufacturing of complete power plant equipment, including turbines, components and accessories, through appropriate technological tie-ups with other manufacturers. A strategic partner may also be roped in later. This would be done by NTPC and BHEL by either reducing their existing stakes or by infusing fresh equity. The proposed JV would start operations within 15 months of incorporation, he said, adding that the MoU would not impact the company's existing agreement with BHEL, which is also for entering the equipment manufacturing space. "There is no exclusive deal (with BHEL). We are two independent companies and are at a liberty to produce any equipment'headded. NTPC and BHEL have signed a JV agreement to jointly undertake EPC projects in lndia and abroad. Recently, the MoU was modified to include a clause that besides undertaking EPC projects, the two companies shall also manufacture and supply equipment for power plants and other infrastructure projects in India and abroad. Both BHEL and NTPC would have an equal equity participation in the JV Sankaralingam said once formed, JV with Bharat Forge would also bid for tenders. "Our arrangements with BHEL and Bharat Forge will result in two separate companies. Both will compete and bid for orders," he said. After a slippage in meeting 10th plan target, the government has been promoting the idea of having more players for equipment manufacturing, being dominated by BHEL.

POWER FAILS TO LIGHT UP
UMPP SCHEME, MERCHANT POWER PROJECTS, TARIFF-BASED BIDDING IN TRANSMISSION AND APDRP RECAST ARE LAGGING

THE power sector is once again set to disappoint finance minister P Chidambaram as he gets ready to present Budget 20d£ The sector has earned a dubious reputation of missing targets year after year, and 2007-08 would be no different. The slippages are not only in case of the UPA government's pel project, the ultra mega power project (UMPP) scheme, but also in case of other initiatives like developing merchant power projects, tariff-based bidding in transmission sector and restructuring the Accelerated Power Development and Reforms Programme (APDRP). The budget 2007-03 had emphasised creating additional capacity through UMPPs. However, the year is expected to end with only one new UMPP at-Krishnapatnam in Andhra Pradesh being awarded to the private developer. The government was aiming to initiate bidding for a majority of the nine UMPPs identified by it during fiscal 07-08 but failed to do so. Though the bidding for Sasan project was completed in 2007-08, it had spilled over from 2006-07 due to the controversy surrounding the initial winning bidder. Preliminary bidding for Tilaiya project has been conducted, but final bidding is unlikely to be completed this fiscal. Other UMPPs remain just on paper as of now. Another budget promise, to encourage merchant power projects (MPPs) in the country, has failed to live up to expectations. With no uniformity in wheeling charges and cross-subsidy surcharges levied by state utilities on private developers, open access (i.e. direct sale of power by the merchant plant) has failed to take off, putting a question mark on the success of MPPs. Power regulator CERC in January had issued guidelines for open access in case of inter-state Transmission. As of now nor even a single MPP has got off the ground. The budget had proposed to incentive development of MPPs. This has not taken place, as the Cabinet is yet to clear a revised mega power policy. Moreover, the finance ministry and Planning Commission are against bringing MPPs and captive projects on par with other mega projects with regard to tax incentives as these units would sell power a t a premium.

POWER TARGETS NOT MET YET, SAYS SHINDE

POWER MINISTER Sushil Kumar Shinde on Thursday admitted that the country had failed meet the power capacity addition targets in the past three decades, but sounded confident the country would be able to add an ambitious 78,577-mega watt proposed in the 11th Five Year Plan. Addressing reporters, he said capacity addition targets were not met in the past due to orders not being placed in time, delay in supply of machinery and lack of monitoring of the ongoing projects. "We went into the details to find out why we failed to meet our capacity addition targets. We have identified the areas. Orders for machinery of projects to the tune of 10,950 will be placed by March, Shinde said. On fresh bids being invited for the remaining 6 ultra mega power projects, Shinde said, "The process for the UMPPs is in place. Alternative sites are being identified for Girye in Maharashtra, Tadri in Karnataka, Akaltara in Chattisgarh and Ib valley in Orissa." The government is now hunting for new sites, as these sites have not been found suitable for UMPPs. "We are looking for alternative sites," Shinde said. Stro