NEW DELHI: SAIL-led consortium AFISCO will initially invest only up to Rs 7,000 crore in Afghanistan for setting up a steel plant with an annual capacity of up to 1.5 million tonnes along with necessary infrastructure.
After winning bid to mine three iron ore mines at Hajigak in war-torn Afghanistan in November, 2011, AFISCO had said it would invest $ 10.8 billion to set up a 6.2 mtpa steel plant in two equal phases along with a 800 MW power plant, besides creating necessary infrastructure.
The reasons for pruning the initial investment have been communicated in the draft agreement paper sent to Afghan Mines Ministry, which found the attributes as "normal" and thus, have raised no objection, a source said.
"We have scaled down the project to be developed in the first phase. In contrast to the original plan of putting up a 3.2 million tonnes per annum steel plant in the initial phase, we have decided to put up the plant having capacity having a size between 1.2-1.5 mtpa," he said.
Accordingly, the investment in the first phase would be between Rs 6,000-7,000 crore for developing mines and setting up of steel and power plants and creating infrastructures that include railway lines for bringing in coal and sending final products to various locations within and outside Afghanistan.
Afghan Iron and Steel Company (AFISCO) plans to fund the initial project through debt and equity in the 70:30 ratio and has already approached International Bank for Reconstruction and Development (IBRD) and International Finance Corporation to fund the debt part, the source said.
"The equity part would be financed by consortium members in the ratio of their respective shareholding," he said. Apart from SAIL, the other consortium members are RINL, NMDC, JSW, JSW Ispat, Jindal Steel and Power Ltd and Monnet Ispat.
Afghanistan's Mines Minister Wahidullah Shahrani, who was in town earlier this week and met senior SAIL officials, said that negotiations on the deal had been concluded. The SAIL-led consortium had assured it would deliver its commitment, but the project would be developed in phases, he added.
"That is natural with this type of mega projects," the Minister had said. He also said final agreement between his government and AFISCO would be signed in a few weeks and the pending approvals from the Afghan government to take the project forward was also "a matter of four to five weeks" only.