The Andhra Pradesh government has fast-tracked work on setting up a steel plant in YSR Kadapa district even as protests rage in Visakhapatnam over the Centre’s plan to privatise the Visakhapatnam Steel Plant. The state government recently selected Liberty Steel, the third-largest steel producer in Europe, as its joint venture partner to establish and operationalise the steel plant by March 2024.

Sagili Shan Mohan, Managing Director of YSR Steel Corporation Limited, an undertaking of the Government of Andhra Pradesh (GoAP) set up to establish a 3 MTPA Steel, told The Indian Express the plant has been given environmental clearance by the Ministry of Environment, Forest and Climate Change, which is crucial for work to start.

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Speaking to The Indian Express, Mohan said the plant will give rise to ancillary industries around it and generate a lot of indirect employment, which will change the landscape of the Rayalaseema region. Excerpts from an interview:

When will the steel plant become operational? Can the state government run the plant profitably while facing stiff competition from private companies? Does the government intend to stay in the business for long?

The government is firm on its commitment to have the steel plant running by March 2024, as promised by Chief Minister Y S Jagan Mohan Reddy. The government’s main objective is to establish a steel plant to provide employment opportunities to local youth. As it is not the governments’ cup of tea to establish and run a steel plant efficiently, we decided to rope in a private steel major as a JV partner to take advantage of their experience and expertise in establishing and operating the steel plant. While searching for a suitable JV partner, we understood that though private players were interested in establishing the steel plant, most of them were not in a position to start the activities immediately due to the financial impact caused by the coronavirus pandemic. Private players requested for government’s support in taking up the project. This is when we decided to put in upfront equity of Rs 500 crore in the steel plant to help the JV partner kickstart the project. The government will invest up to Rs 3,000 crore in phases. The JV partner shall take the controlling stake by the date of commissioning, and YSRSCL plans to completely exit from the project within a maximum tenure of seven years.

At what stage is the project now? How much will it cost?

We have chosen Liberty Steel Group as our JV partner and we are now finalising plant configurations, layouts, and product mix. The project cost is estimated to be around Rs 10,000 crore for Phase 1, with the YSRSCL putting in up to 3,000 crore.

Last month, the steel plant project received environmental clearance from MoEFCC. Of the 3,500 acres allotted to the project, the Andhra government has already acquired and allotted 3,148.68 acres land in Sunnapuraalla and Pedanandluru villages in YSR Kadapa district. We are in the process of acquiring a balance of 370 acres. We don’t see any challenges in the process.

The construction of the plant will start soon. To procure raw materials, the state government had signed an MoU with the National Mineral Development Corporation (NMDC) for the supply of 5 million tonnes of iron ore per year to YSRSCL. However, in Phase I, Liberty Steel is planning to procure raw materials from its subsidiaries in Australia. It is free to procure iron ore from other sources as well.

We have already issued tenders for the construction of a 9-km long four-lane road to connect the site to NH-67. The Indian Institite of Scient in Bengaluru has completed the topographical survey and geo-technical Investigation in the plant site and submitted their final report. The state government has allocated 2 TMC of water from the Gandikota reservoir for the plant. Rail India Technical and Economic Service Limited is doing the DPR for rail connectivity to the nearest station.

Who is the JV Partner?

Europe-based Liberty Steel has been selected as the JV partner. The company has 14 Million Tonnes per annum crude steel capacity and 22 MTPA rolling capacity with over 200 manufacturing locations across 12 countries, and employing more than 35,000 people around the world. This is the first significant investment in the country for Liberty Steel. The chairman of Liberty Steel Group is Sanjeev Gupta. Liberty Steel will take the entire responsibility of operations and maintenance of the steel plant, and marketing.

Does YSR Kadapa district have any advantages to set up a steel plant? Why was this location chosen?

The steel plant initiative is to realise the long-standing dream of the people of Rayalaseema to have a major industry in the region. CM Reddy believes the plant can put the region on the path of development. Though the Andhra Pradesh Reorganization Act, 2014, Thirteenth Schedule, provides for the establishment of an integrated steel plant in YSR District post bifurcation of the state, not much progress has been made in this regard.

The YSR Steel Corporation Limited (YSRSCL), formerly AP High Grade Steels Ltd, was formed to establish the plant at Sunnapurallapalle and Peddanandluru villages of Jammalamadugu mandal. It has strategic advantage, being close to Chennai, Bengaluru, and Hyderabad. The site is also close to the Bellary iron ore belt, one of the major sources of iron ore in south India. The proposed site is just 9.5 km away from NH-67. The Krishnapatnam Port, a deep draft modern port, which will soon become the largest automated port for exports and imports in South Asia, is about 225 km from the project site. The plant would be connected to Muddanur railway station, which is 10 km away. The plant has air connectivity through Kadapa airport, which is 40 km away, while the nearest international airport is in Bengaluru.

The Rayalaseema region has remained backward and undeveloped. Will the steel plant make any difference?

We see it as a new steel city in the making. The multiplier effect of the steel plant is a well-known phenomenon. Steel plants have transformed the cities of Jamshedpur and Vizag. Through this project, we are working to bring in a similar impact in the Rayalaseema region. On completion, the Kadapa Steel Plant would start making a significant contribution to national steel production, would fulfil the long-awaited dream of having a steel plant in Rayalaseema, and provide jobs and kickstart a fresh beginning in the industrial landscape of the region.

We expect the steel plant would attract other industries and companies to the region along with many ancillary units, thus opening up the gates to the sustainable development of the region. The steel plant is expected to provide direct employment to more than 3,200 people in phase 1, and indirect employment and employment from ancillary industries opening up several more thousands of opportunities. We expect that a majority of the jobs would go to locals. All this will transform the region.

Apart from the upfront equity, what is the Andhra government doing to facilitate setting up the steel plant?

The government will invest up to Rs 3,000 crore in phases towards establishing the steel plant. It will provide encumbrance-free 3,500 acres land in the form of equity in kind; uninterrupted and dedicated power supply line up to the plant site; a 4-lane access road from the plant location to NH-67; railway tracks connecting the site to the nearest railway station, allocation of 2 TMC water per annum to the plant. The JV company will develop and operate the project with a capacity of 3 MTPA of finished products and commence commercial operations by March 2024.