South Korea's Pocso, the third largest steel maker in the world, on Wednesday signed an agreement with the state-run Rail Vikas Nigam Ltd (RVNL) to become a shareholder of the holding company that is building a railway line between Haridaspur and Paradeep in Orissa.
RVNL heads consortium of nine companies to build an 82-km broad gauge rail line between the Paradip port and Haridaspur - an extension of the iron ore belts of Bansapani to Tomka in Keonjhar district- where Posco captive mines are located.
The shareholders' pact will allow Posco to become a part of the holding company - or special purpose vehicle - that has been set up by RVNL to operate the rail line in a public-private partnership on build-operate-transfer basis, officials said.
Pocso's Indian arm has acquired 10 per cent stake with an investment of Rs 275 million ($6.1 million) and will nominate one director on the company's Board. The railway project envisages a total capital expenditure of Rs 5.98 billion.
The other investors include Paradip Port Trust (10 per cent), Essel Mining (10.9 per cent), Rungta Mining (10.9 per cent), MSPL Mining (5.45 per cent), Jindal Steel (1.8 per cent), Steel Authority of India (1.8 per cent) and the Infrastructure Development Corp of Orissa (0.66 per cent).
The debt-equity ratio of the project is pegged at 1:1, where the holding company will have an equity base of Rs 2.75 billion. Out of 11 board members, six will be from RVNL, officials said.
The proposed rail line will help these companies transport raw materials such as iron ore, coal and imported coking coal, as also and finished goods to and from the steel hub at Duburi in Jajpur district.
Though the line was sanctioned in 1996-97, work on it has not progressed much due to fund constraints, officials said.
This new rail link will reduce the distance by almost 41 km from the existing Haridaspur-Cuttack-Paradeep line. The company guarantees 6.48 million tonne per annum traffic in the first phase, increasing the viability of this venture.
"This infrastructure will not only help our project but also prove crucial for the entire steel sector in the state," a statement issued by Posco said, adding the project will also help to secure stable and competitive rail transportation.
"Participation in the SPV is yet another step towards our commitment to support the steel sector on a long term perspective," Posco's India chief Soung-Sik-Cho was quoted as saying.
"We are very happy being a part in the emergence of Orissa as the steel hub of the world in the coming days."
Posco India is setting up a $12 billion steel plant at Paradeep in the coastal district of Jagatsinghpur in one of India's largest projects with foreign investment.