INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

POSCO FIRST FOREIGN FIRM TO BOARD INDIAN RAILWAYS

RAILWAY minister Lalu Prasad Yadav is keen to bring Korean steel maker Posco on board. In what would be the first investment by a foreign company in a railway project, Posco is all set to pick up 10% equity in a rail corridor connecting its steel plant with Orissa's Paradeep Port.

The project would also be the first of its kind in the country, wherein it would be developed jointly with rail users — PSUs and private companies. Rail Bhawan sources also confirmed that besides Posco, steel companies like Jindal, SAIL and MSPL Mining Company are also likely to join the consortium.

“We have received a firm offer from Posco to invest 10% of the equity in Haridaspur (close to Posco's proposed plant)-Paradeep Port rail link, which is being developed by a special purpose vehicle (SPV) led by Rail Vikas Nigam Ltd (RVNL) of Indian Railways. The investment will allow the Korean company faster access to the port for shipping coal, iron ore and steel,” Orissa government sources said.

Posco is also planning to set up its own port at Jatadhari near Paradeep, which would also be serviced through the new track. The Haridaspur-Paradeep rail line project is likely to cost Rs 560 crore and will have an equity component of Rs 270 crore. Posco is likely to fork out Rs 27 crore initially for the 10% stake.

The new corridor will be an alternative to the Cuttak-Paradeep railway line. It would reduce the distance and time of transportation of raw materials like iron ore and coal from Orissa's Keonjhar and Angul districts to the plant site.

The RVNL board is understood to have cleared the project recently, paving way for the SPV formation and work on the project.

Besides the product-specific railway freight corridor, RVNL would be completing another 155-km rail link between Banspani and Dubri by this December. This line would help ease pressure from the Chennai-Kolkata link and provide new access routes for coking coal landing on Paradeep Port for use by the state's steel companies.