Thursday, September 06, 2012

Three years of niggling arguments with Eva Morales

After almost three years of niggling arguments with Eva Morales, Bolivia’s President, Naveen Jindal finally convinces Bolivia to sign on the dotted line for a possibly mammoth global coup of a deal; B&E analyses the critical road blocks and opportunities going forward 

In recent times, JSPL has expanded its presence in offshore locations in Asia, Africa & South America. With its captive coal & iron-ore mines, JSPL has been successfully using backward integration to ensure sustained value creation. As CEO Vikrant Gujaral has himself said, “The integrated steel producer model is the most profitable in the entire industry.” In India, though, JSPL has been facing the coal ministry’s displeasure over its utilisation of coal mines allocated to it. The ministry has noted that the company has not been using the Utkal and Ramchandi coal blocks that were allocated to it in Orissa. JSPL was also facing environmental hurdles with respect to its 2400 MW steel plant in Raigarh, but these hurdles have been cleared with the granting of environmental clearance and production is expected to commence soon. Two more steel plants are planned at an investment of around Rs.440 billion. Another potential threat is the recent policy decision that directed miners to share 26% of profits with people impacted by the mining operations. The company has itself come out to oppose such a ruling, saying that the allocation should be a percentage of operating cost. That said, the Bolivia move for JSPL could well be a make or break investment project. Make, because if the project comes through without hitches and glitches, JSPL – with its captive capacity – will be on its way to become one of the world’s top ten steel and power players. And break, because all in all, Bolivia is a country that was not too long back in the past riddled with political uncertainty and class revolution. Morales himself came to power as a result of a popular uprising by the poor class against the rich. In other words, JSPL would have invest in magnanimous amounts of reinsurance to protect themselves against sovereign risk once the project finally starts. But that is, once it starts. In a country like Bolivia, if it’s taken three years for the government to hand over land, one really doesn’t have to wonder too hard on how much longer it could take further for the actual plant to initiate operations.


Source : IIPM Editorial, 2012.
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