Site clearance holds back Tata Steel’s project

A senior official of the Ministry of Planning and Investment (MPI) last week reaffirmed that Vietnamese authorities would find difficulty to cover the costs of clearance at the site where Tata Steel – one of the global leading steel makers – proposed to build a $5 billion steel manufacturing project.

“The cost is equivalent to the state budget of one province. At present, local authorities will find difficulty to cover the site clearance compensation,” said the official.

The message, presented at a meeting with Tata Steel  representative, once again expressed the Vietnamese government’s instructions that Tata Steel and its local partners, including Vietnam Steel Corporation and Vietnam Cement Industries Corporation, would seek ways to pay the costs associated with resettlement and site clearance of the project site.

In Tata Steel’s plan, the project which will cover 725 hectares in Vung Ang Economic Zone in central Ha Tinh province, will produce 4.6 million tonnes of steel per year. Vung Ang Economic Zone Management Authority initially estimated the cost for site clearance was about VND2 trillion (around $100 million).

In an interview with VIR last year, Indronil Sengupta, chief executive of Tata Steel’s South East Asia projects, said the cost of resettlement and site clearance works would increase the project’s risk in the eyes of financing institutions.

During the meeting with the MPI officials last week, Sengupta admitted that site clearance issue was holding back the project. But he added Tata Steel and its local partners were trying to resolve the outstanding issues and gain an investment certificate for the project.

Apart from site clearance, Tata Steel also needs to resolve eight other outstanding issues if it wants to make progress of its steel project in Ha Tinh. Those include questions relating to water supply, environmental issues, the project’s progress, the supply of raw materials, agreements by foreign partners to arrange capital for local partners and tax law application.

Tata Steel initially proposed the Ha Tinh project in May 2007, when it signed a memorandum of understanding with Vietnam Steel Corporation to develop the project.

A year later, a joint venture agreement was signed between Tata Steel, Vietnam Steel Corporation and Vietnam Cement Industries Corporation, in which the foreign partner committed to holding a 65 per cent stake.

The joint venture’s first application dossiers for an investment certificate were submitted to the Vung Ang Economic Zone in August, 2008.