On June 20, Rajya Sabha MP of the Telugu Desam Party CM Ramesh and MLC from Kadapa district Ravi sat on a fast-unto-death demanding that the promise to consider setting up a steel plant in Kadapa, made in the AP Reorganisation Act 2014, be honoured. After Ravi's health condition deteriorated, he was shifted to a hospital, but, till Friday noon, a weak Ramesh was still at it.
Across the Andhra-Karnataka border, around the same time, another politician waded into the politically contentious issue. Controversial mining baron Gali Janardhana Reddy offered that he is willing to make his Brahmani Steel plant in Kadapa operational and ready for steel production within two years.
When it was conceived in 2007, Reddy's Brahmani Steels was to produce 2 million tonnes of steel a year and aimed to take its full production capacity to 10 million tonnes by 2017 but his arrest in 2011 put a full-stop to all such plans.
The Andhra government claims Reddy's offer does not arise out of concern for the people of Kadapa and there is more to it than what meets the eye. To understand why a steel plant project has created a political storm between the southern state and Delhi, rewind to 2014.
When Andhra Pradesh was bifurcated, the Centre had promised that the Steel Authority of India (SAIL) would examine the feasibility of establishing an integrated steel plant in YSR Kadapa district of Andhra Pradesh and at Bayyaram in Telangana. The initial feasibility report given by SAIL in December 2014 said both projects were “financially unviable”. But when the state governments insisted, the job of taking a second look was entrusted to Metallurgical and Engineering Consultants (India) Limited (MECON), which is a PSU under the Ministry of Steel.
In successive meetings, both governments were asked to share details of the surveys done to assess the quality of iron ore in the two states. While it is known that the Rayalaseema region in Andhra Pradesh is home to iron ore reserves, in Bayyaram, the iron ore in the mines did not have the requisite ferrous content so it would have to be sourced from Chhattisgarh.
In November 2017, the Union Steel Secretary suggested as a short-term measure, an autograde steel making joint venture between SAIL and Arcelor Mittal in Visakhapatnam, but the Andhra government refused to compromise on Kadapa.
“After the Andhra government confirmed the existence of 140 million tonnes of iron ore reserves, a four-member team inspected the mining areas in Anantapur and the land sites in Kadapa. As sought by MECON, the Andhra government sent all the required information, including land details, etc. After this on 14 February 2018, the final feasibility report was submitted to the Steel Ministry,” says C Kutumba Rao, Deputy Chairman of the Andhra Pradesh Planning Commission.
“It is a complete lie,” says GVL Narasimha Rao, Rajya Sabha MP of the BJP. “No such feasibility report has been submitted. How can it be prepared when the state government is yet to provide vital information on issues that have a bearing on the cost of the project? In fact, it was only on 22 June that the information was provided.”
In its letter to the MD of the AP Mineral Development Corporation, MECON had sought details about the mines and railway linkages to the mines, and pointed out that the Andhra government has not considered the cost that will be incurred to set the 14-km rail line. The letter said the replies from the APMDC are necessary for the finalisation of the report. But the Andhra government says that MECON had confirmed to officials of both Andhra and Telangana that it had submitted its final report in February.
“Clarifications were sought even in March and the information was immediately provided by Andhra. What they are doing is to ask for the same details again and again to delay the project,” argues Kutumba Rao.
It is obvious that one of the two sides is being economical with the truth. The 180-degree difference in the versions provided by the Central and Andhra governments is bizarre, to say the least. It raises suspicion over whether the dispute is entirely political.
In March, the Telugu Desam, that was BJP's partner in the NDA, pulled out. And with it, the Kadapa steel plant project also seems to have gone into a tailspin.
In June, the Government of India filed an affidavit in the Supreme Court giving the impression that there will be further delay in arriving at a decision. The Andhra government points out that at the same time, three PSUs – SAIL, NMDC and RINL – also made it clear that financially they were not in position to invest in any steel plant in the country. The BJP backs the PSU position, pointing out that the steel industry, after three bad years between 2014 and 2017, is only beginning to look up now.
Meanwhile, Telangana has said it will set up a steel plant in Bayyaram at its own cost, most likely a joint venture between Singareni Colleries and Telangana Mineral Development Corporation.
“We are willing to provide concessional power and water and other tax incentives to get the steel plant going,” says Jayesh Ranjan, Industries secretary of Telangana. “We have not thought about involving a private player at this stage though we have not closed that option either.”
Which is why Janardhana Reddy's offer is significant. Reddy's argument is that he had invested Rs 1,350 crore in his Brahmani Steels in Kadapa and, therefore, he should be reimbursed or given first right of refusal, before another steel plant project can be grounded. Alternately, he has offered to the Andhra government to buy out Brahmani Steels and produce steel.
The Andhra government is no mood to work with a tainted mining baron, that too someone who is closely associated with the TDP's political rival, Jaganmohan Reddy. It points out that the CBI has accused Reddy of illegal mining and the 10760 acres of land in Kadapa allotted by the YS Rajasekhara Reddy government in 2007 to the project, was cancelled by the Kiran Kumar Reddy regime in 2013. Janardhana Reddy wants Chandrababu Naidu to nullify Kiran Reddy's decision so that work can re-start. But there is no clarity on how Reddy will get past the CBI and the ED, both of which are involved in his mining cases.
Sources in the TDP allege that this offer by Reddy is part of the BJP's plan to rehabilitate his business, as thanksgiving for the help the Ballari brothers provided to the party during the Karnataka elections. For Reddy, the deal could not be better. Not only will the steel plant get up and running, it could also allow Reddy to worm his way back into using the Obulapuram mines, which were leased to him and are now shut.
“This proposal is not even under examination of the ministry or MECON. They will not take cognisance,” says Narasimha Rao, rubbishing the conspiracy theory.
The Andhra government wants the Centre to bring in a new private player if it cannot convince one of the PSUs and also take care of the costs involved. But Andhra could be in a Catch-22 situation. With a PSU plant almost ruled out and if the Centre gets no private player, what option will it be left with? A deal with Brahmani Steels with all its legal complications.
(Views expressed by the author are personal.)