India’s draft National Steel Policy (NSP) once finalized will give a strong policy-level push for the merger of iron ore producer NMDC Limited and steel producer Rasthriya Ispat Nigam Limited (RINL), an official at the Indian Ministry of Steel said on Friday, January 20.
The steel ministry official said that the NSP aims to push government-owned steel and mining companies to focus on their core operations and divest all core businesses.
“Government-owned steel companies need to not only compete with private integrated steel players and cater to the requirements of small end-users but also have to be globally competitive. In order to provide economies of scale, these government companies will be encouraged to increase focus on their core competencies and divest their non-core assets,” the official said quoting from the NSP.
Under such a government policy, a merger of RINL and NMDC would ensure backward integration for RINL into iron ore mining and forward integration in the case of NMDC in value addition to its own iron ore production.
With the government focusing on divesting non-core assets of government-owned companies, NMDC is already under pressure to seek a strategic investor to hive off its stake in its upcoming three million mt per year steel mill under construction at Nagarmar in the central Indian state of Chhattisgarh.
A RINL-NMDC merger under the NSP would ensure NMDC with upstream value addition assets for its iron ore, while in case of RINL it would end its decade-long search for captive iron ore mines. And instead of NMDC hiving off its Nagarmar steel mill, it would give RINL additional steelmaking capacity, the official added.