Tata Steel, SAIL in coal mining venture

Tata Steel, the world's sixth largest steel maker and the public sector giant Steel Authority of India (SAIL), will form a coal mining joint venture to secure their coking coal supplies to meet their future steel making capacity.

The two steel makers are expanding capacity to cope with rising steel demand, with SAIL expected to invest Rs50,000 crore to raise its steel making capacity to 26 million tonnes. Tata Steel is also boosting capacity through and new and expansion projects. Its five million tones per annum Jamshedpur works is gearing up to double its capacity by December 2010.

The Tata Group company is also making steady progress on its three greenfield steel projects in Jharkhand, Orissa and Chhattisgarh, to add 23 million tonnes to its present capacity. It also plans to set up steel making capacities in Vietnam, Iran and Bangladesh. 

Therefore securing raw materials is crucial for them, a majority of which would have to be imported if sufficient quantities are not available within the country.

The coal mining joint venture that SAIL and Tata Steel have proposed will mine four coking coal blocks in Jharkhand that have an estimated coal reserve of 500 million tonnes.

According to media reports, the two companies are expected to contribute equally towards the initial share capital of Rs2 crore for an equal shareholding in the new joint venture and have equal representation on its board.

SAIL has formed another joint venture with four other public sector firms to acquire overseas coal properties even as another public sector firm, Coal India Ltd, through its overseas affiliate is also reported to be scouting for coal mines in Mozambique and Australia.