Tata Steel holds back greenfield expansion plans in India

Tata Steel, India's largest private sector steel producer and the world's sixth largest, although reporting a 215 per cent rise in its consolidated quarterly net profit, boosted mainly by profits from its Indian operations, has put investments worth Rs66,000 crore in its proposed two large greenfield expansion plan in India on hold.

With the US and Europe under recession, China cutting back on demand, the global steel industry is staring at a slowdown. Rising production costs have already forced a number of large steel makers like Arcelor Mittal and Baosteel Group to announce production cuts. (See: Steel slowdown: Chronology of production cuts) 

Tata Steel, which had signed a deal with the Jharkhand government in Sepember 2005 to set up a 12-million tonne capacity integrated steel plant at an investment of Rs53,000 crore in the state and a Rs16,000-crore 5-million tonne plant in Chhattisgarh, will be put on hold temporarily till demand for steel picks up.

The company has not yet acquired land at both Chhattisgarh and Jharkhand and with the current global decline in steel, the projects will be further delayed but the company is committed to go ahead with its expansion plans of enhancing the capacity of its Jamshedpur plant from 5 to 10 MTs per annum as also its 6-million tonne steel plant in Orissa.

Tata Steel said Corus unit will cut crude steel production by about 20 per cent or 1 million tonne over the next three months due to slowing demand and may prolong the cut to early 2009, but the company has not yet announced any cuts in its Indian operations as it estimates that the demand for steel will still be strong in the domestic sector.

In August this year, the company had set up Tata Steel Global, a fully-owned holding company in Singapore to raise funds for international acquisitions of smaller steel makers and mines. (See: Tata Steel sets up overseas holding arm in Singapore; plans to raise funds for acquisitions) 

It may now decide to go slow on foreign acquisitions in view of the global meltdown and liquidity crunch which has also affected the steel industry.