The steel ministry has proposed a quid pro quo deal with LNM group chief LN Mittal under which he will sell a certain percentage of steel to be produced at his proposed plant in Jharkhand at a discount in the domestic market.
In return, the ministry will meet Mittal's demand for supply of iron ore in excess of what he will require for production at the Jharkhand plant.
The proposal was made at a meeting Mittal had with steel ministry officials last week, sources close to the developments said. The steel ministry had posed the counter-demand when Mittal had asked for a guaranteed annual supply of 30 million tonnes of iron ore annually, officials said.
This is double the requirement of Mittal's proposed 10-million tonne steel unit. The Jharkhand plant will utilise half of the iron ore, while the balance will be exported to Mittal's other facilities abroad.
Mittal, the world's third richest man after Bill Gates and Warren Buffet, promised to get back to the ministry on the arrangement, sources said.
The development is significant as the government's demand for cheap steel from Mittal will help consumers but will put pressure on domestic steel makers.
Sensing that an arrangement may be reached by Mittal and the government, steel makers have started lobbying against the deal. Said a steel company executive: "The ministry's proposal will mean nothing but dumping of steel by Mittal. The industry is already under pressure due to huge imports. Any move to sell steel at discounted rates will add to our problems."
India's annual steel consumption is to the tune of 38 million tonnes and about 2 million tonnes of steel is imported annually. Domestic steel makers have already met Steel Minister Ram Vilas Paswan seeking clarity on the iron ore policy immediately after Mittal announced he was close to finalising his proposed plant in Jharkhand. Industry sources said an iron ore policy would be announced shortly.
Mittal -- who has now set his sight on India and has said he would be interested in the public sector Steel Authority of India if it is put up for divestment -- owns 12 giant-sized steel plants that are part of a far-flung empire stretching from Canada to Trinidad & Tobago to Kazakhstan and Indonesia.
Mittal's biggest profits come from his riskiest and most ambitious buy. The giant Karmet steelworks in Kazakhstan bought in 1995 was believed to be a knife-edge gamble when it was bought.
