JSW has been “setting up” a three million tonne greenfield steel project in Salboni, a troubled area in West Bengal, since 2007. That would certainly be buried now, after the Ispat takeover

With Ispat Industries in his kitty, Sajjan Jindal has a merry new year ahead. But wait a minute. Wasn't he setting up a 10 million tonne steel project in Salboni in West Bengal? What happens to that project now?

As we mentioned in an earlier article, one of the most difficult projects to get off the ground in India today is a greenfield steel project. No matter who you are, you have to wait for years together trying to get coal linkages, captive mines and the most devilish of all tasks-land acquisition. Ask Pohang Iron and Steel Company (Posco) or Lakshmi Mittal, who apparently has a line into 10 Janpath. He got frustrated trying to fix things up for a new steel plant in Jharkand, gave the iron ore-filled Orissa a go-by and shifted to Karnataka. No luck there either, for it's equally messy and politicised down there. Mittal's steel project is grinding its way through the files.

In this context, what happens to JSW's Salboni project, which was dreamt up at a time when the market was on a tear; there was no dearth of global capital; steel prices were shooting up; Bengalis wanted to attract investments and Sajjan Jindal wanted to set up another steel project 13 years after the first (Jindal Vijaynagar Steel) almost bankrupted him.

Things have changed. He has Ispat now. The world economy is still emerging from a huge crisis and setting up a greenfield steel project has become more difficult. No surprise, therefore, that Jindal said in a press conference recently, "It is very hard to set up greenfield capacities...it's like building a universe."
Where would that leave the group's much-talked about steel venture, 600MW captive power plant and 1,000MW independent power project at Salboni; more so now that the Ispat acquisition will keep Jindal occupied for a while. That means, four years of efforts and a bit of money wasted.

On 11 January 2007, JSW signed an agreement with the West Bengal government to set up a 10 million tonne steel plant in Salboni. It was supposed to be the single largest investment; another one of those mega ideas to herald the re-industrialisation of West Bengal. The plant was supposed to come up on 5,000 acres.

The first phase of the steel project (the three million tonne steel plant, 600MW captive power plant and 1,000MW independent power plant) would require Rs15,000 crore of investment that was to include development of coal mines and a berth in the Haldia port. Jindal also announced two more phases of expansion, costing Rs10,000 crore each, to take steel production to 10 million tonne. The plant was supposed to create 10,000 jobs, also providing for those who would sell their land to the Jindals.

But Jindals started slowly. In 2008, the area was suddenly listed as a Special Economic Zone (SEZ), although land acquisition had already started in 2007. After the Singur episode involving Tata Nano and the atrocities in Nandigram by the Left Front over a chemical zone, anything tagged 'SEZ', 'industrialisation', 'land acquisition' or 'Left Front' raised the suspicions of people. The government had apparently arranged for nearly 4,000 acres, and JSW directly bought 500 acres from the farmers. Mr Jindal declared loftily that the land was voluntarily ceded by the owners, and he made promises that the farmers would be compensated with jobs, money as well as a stake in the company. The West Bengal government too, proudly announced that this was the ideal SEZ project. But after the market crash in 2008 and the consequent global economic crisis, the project was pushed back for one reason or the other. Throughout 2009 hardly any work was done.

Midway through 2010, JSW declared that the project would take off in a year, and that a boundary wall would be constructed soon. In October, the company said that the wall would be completed in December, and that work on the main part would start in January. Barely a fortnight later, Mr Jindal declared that the work would definitely start by April 2011 and that it would be completed by 2014. Since then, no progress has been reported. Now, the Ispat deal has happened.

With the state assembly elections slated in May-June 2011, both the Left Front and the Jindals will lie low. Sajjan Jindal will likely focus on Ispat and keep his distance from the red no-go sign. Or is it amber; awaiting the arrival of an ambitious new chief minister, who together with an ambitious steel magnate, might recognise what this hitherto hopeless project might deliver for them-bigger size for the businessman and an industrial showpiece for the politician.