Tata Steel gets boxed into a corner

March 07, 2011 | 07:30
Tata Steel will enter last chance saloon when Ha Tinh People’s Committee asks whether it will pursue its $5 billion integrated steel project.
illustration photo

A Ministry of Planning and Investment (MPI) source said documents had been sent to the provincial authority and Tata Steel asking the two sides to definitively resolve existing issues holding back the Vung Ang Economic Zone-based project.

Ho Anh Tuan, head of Vung Ang Economic Zone Management Authority, confirmed that local officials had received the MPI documents.

“We will have a meeting with Tata soon to resolve all existing issues,” said Tuan.

The issues include site clearance payments, water supplies and the provision of raw materials.

According to Ha Tinh People’s Committee requirements, Tata has to cover site clearance costs for 725 hectares, water supply system construction and prove its raw material sources.

Under the Investment Law, investors do not have to pay costs for site clearance and water supply construction. However, Tuan said those costs were huge and could not be covered by the province.

He estimated building water supply system costs would be around $40 million, while site clearance costs would be around VND2 trillion ($100 million).

If Tata incurs those costs, it will be paid in form of tax and land rent exemption.

Tata, however, demanded equal treatment with other investors in the zone.

The Indian investor also asked for equal treatment in the payment for site clearance and resettlement of residents like for Taiwan’s Formosa Plastics Group, which had 70 per cent of site clearance costs covered at its giant port and steel complex project in the zone.

“If Tata does not agree with our requirements in the next meeting, we could not grant it an investment certificate,” said Tuan.

However, he added the final decision would belong to the prime minister.

Tuan said the provincial authority wanted Tata to make Ha Tinh a steel manufacturing hub in the country.

In 2008, Ha Tinh People’s Committee granted an investment certificate to Taiwan’s Formosa Plastic Group to build a giant seaport and steel manufacturing complex neighbouring Tata’s site.

Formosa completed site clearance and started work this month.

A source from Formosa Ha Tinh Steel Corporation, a wholly-owned subsidiary of Formosa Plastics Group and the investor of the complex, said the firm was going to sell a 5 per cent stake in the project to China Steel, the largest steelmaker in Taiwan.

The source, however, did not reveal the price of the deal.

Last year, China Steel said it would spend $135 million in buying a 5 per cent stake in the project. Formosa currently holds a 5 per cent of China Steel’s cold-rolled steel plant in southern Ba Ria-Vung Tau province.

China Steel said its cold-rolled steel plant in Ba Ria- Vung Tau, which remains to be on paper, would mainly source raw materials such as hot-rolled steel coils from its parent in Taiwan and its affiliate Dragon Steel, but would purchase such products from Formosa’s steel mill in Vietnam.

By Anh Linh


What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional