Now or never for Tata

Tata’s project is not the first to be knocked off its stride by land clearance problems

Tata Steel’s $5 billion steel project is about to enter last chance saloon.

The firm only has a month left to resolve land clearance and water supply issues for its giant integrated Ha Tinh  steel facility, located in the central Ha Tinh province’s Vung Ang Economic Zone (VAEZ), to get an investment certificate.

The Government Office in mid-March requested Tata Steel and Ha Tinh authorities to reach a consensus on the two pending issues by the end of April.

“Unless both sides can reach an agreement on the issues, an investment certificate will be impossible,” according to a senior Ministry of Planning and Investment’s (MPI) Economic Zone Management Department official, authorised to guide the settlement of the issues between the Indian firm and the VAEZ Management Authority.

The MPI official stressed that specific deadline was of necessity to end the project’s state of limbo which has lasted for more than two years.

Tata Steel and its Vietnamese partners, Vnsteel and Vicem have asked for an investment certificate twice, the first time in August, 2008 and then December, 2009.

They already set up a joint venture to carry out the project, in which Tata Steel contributes 65 per cent of the investment capital while Vnsteel and Vicem 30 and 5 per cent, respectively.

Ten months have passed since the Government Office demanded in May, 2010 the Tata Steel-led joint venture, VAEZ Management Authority and concerning state agencies answer all nine issues needed for an investment certificate approval.

They included raw material, land area, water supply, environmental report, transportation and port, site clearance subsidy, capital arrangement, project construction speed and tax. Seven issues were already solved while site clearance fund and water supply remained thorny.

“We welcome the government’s instruction. Now we can concentrate our efforts to resolve the real issues,” Tata Steel Southeast Asia Projects’ chief executive Indronil Sengupta told VIR.

“Of course the solution has to be jointly derived by Vnsteel, Tata Steel and Ha Tinh province,” Sengupta said.

According to VAEZ Management Authority’s deputy head Nguyen Dinh Van, unless the Tata Steel-led joint venture agreed to build its own water supply system, or arrange to buy local water supply, and make an upfront payment for site clearance, an investment certificate would remain a distant dream.

Under initial calculations, the funds required for site clearance in VAEZ is currently between VND0.7-1 billion ($34,825-$49,751) per hectare of land.

“So, it will cost some VND700 billion ($33.8 million) for more than 700ha site of the project,” Van said.

Sengupta, who has consistently  required Tata Steel to be treated equally to other investors in the same province, believed that there were solutions if there was a strong common voice to implement the project by all parties.

“However, it is to be kept in mind that only sustainable solutions can make this project successful. As Tata Steel we do not want a situation that we agree to something during licencing and then we cannot fulfill those conditions in future and abandon the project,” he explained.

Van noted that conditions were currently different from several years ago with many changes in investment policies and prices in the zone.

“Because of our limited funds, we are now requesting investors to pay upfront for site clearance, which will be then deducted in land rent fee and other kinds of taxes after their projects come into operation,” Van said.