What is the future of Tata’s steel project?

The mammoth steel complex project in Ha Tinh province by Tata group can be delayed for indefinite time, because the local authorities and the investor still have not reached the agreement on the most important issues.

Problems

Last week, a high ranking manager of Tata Group paid a working visit to Vietnam. During the trip, the manager came to visit some competent agencies in the province on the occasion of the upcoming Lunar New Year. However, it is clear that the main goal of the visits is to affirm the commitment to implement the steel complex project.

Three years have passed since the day Tata group and Vietnamese partners, including the Vietnam Steel Corporation and the Vietnam Cement Group signed an agreement on setting up a joint venture capitalized at five billion dollars to build a steel complex in Vung Ang industrial zone in Ha Tinh province.

No considerable progress has been made so far. the parties involved have not reached an agreement on the issue of compensation for the site clearance.

Tata has calculated that in order to get 725 hectares of “cleared land”, the investor would have to spend two trillion dong, or 100 million dollars. With 65 percent of the stakes in the joint venture, Tata’s expenses on the site clearance will be very big.

In the recent meeting with local press agencies, Indronil Sengupta, Managing Director of Tata Group in South East Asia said that the expenses would make the project riskier in the eyes of financial institutions.

Meanwhile, the consistent viewpoint of the Vung Ang Economic Zone and the Ha Tinh province’s local authorities is that the investor has to pay all the expenses. , the local authorities consider this as the prerequisite for them to grant the license.

In August 2010, the Vung Ang Economic Zone’s management board, released an ultimatum to investors, saying that they must fulfill necessary procedures prior to August 31, 2010, or the board would take back the 725 hectares of land it planned to allocate.

However, to date, this has not been implemented

What’s behind the decentralization mechanism?

Since decentralization, the projects like the Tata’s project can be licensed by local authorities.

The problem of Tata is that at the time when Tata kicked off the project, Taiwanese Formosa Group also applied for the implementation of a similar steel project.

While Tata was still fumbling with its project, Formosa quickly got the investment license and kicked off the project already in August 2008. Since then, despite some difficulties, the Formosa project has been progressing very rapidly

On October 1, 2010, the Vung Ang Economic Zone’s Management fulfilled the procedures to allocate 3300 hectares of land to Formosa. Besides the support in site clearance, the Ha Tinh province has also completed two construction works that served Formosa’s project. The noteworthy thing is that part of the total expenses has been paid by the state budget.

Meanwhile, on October 15, 2009, Tata had to accept the allocated land area of 725 hectares, 575 hectares less than initially planned.

Thoi bao Kinh te Vietnam asks whether this shows a bias of the local authorities towards certain investors?

Formosa is a big industrial group in Taiwan. However, in the world steel industry, Formosa’s position cannot compare to that of Tata.-Thoi bao Kinh te Vietnam

Tags: Tata Steel Vietnam