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Rediff News  All News  » Business » Jindals in talks to push through Bolivian deal

Jindals in talks to push through Bolivian deal

August 12, 2006 14:40 IST
Navin Jindal-controlled Jindal Steel & Power's plan to invest $2.3 billion in Bolivia is hanging in the balance with the Bolivian government asking for greater share of profit from the project.

"The discussions will continue, and we expect a solution in a week. The bone of contention is a combination of royalties and the long-term prices of gas supply. The Bolivian government is trying to maximise the revenue it can earn from this deal, and we are trying to protect our interests," said Executive Vice-Chairman and Managing Director Naveen Jindal.

He, however, refused to go into the specifics of the royalty rates or gas prices. Jindal said the company had provided all the details sought by the government authorities.

However, international agencies today carried news quoting a Bolivian planning and development ministry spokeswoman saying the government might launch new auction for development of the vast EI Mutun iron ore deposit.

The discussions over payment of greater share of profit for the project, which includes a steel plant, sponge iron factory and development of the 40 billion tonne iron ore mine, between the Bolivian government and representatives of Jindal Steel failed to resolve the issue.

The EI Mutun ore deposit is considered to be one of the largest in the world. The climate in the negotiating room was "unpleasant but had not reached conflict," the spokeswoman was quoted as saying.

Sources said Jindal Steel had to revise its previous proposal of profit sharing with the government "or else it did not stand a chance to win the contact".

Jindal's investment proposal went through the rough weather after the Bolivian President Evo Morales seized oil and gas fields on May 1 to force companies to re-negotiate contracts to pay higher royalties.

The government also ordered Rio de Janeiro-based energy company EBX Group to leave the country in April on allegations on violating environmental rules.

The representatives Bolivian ministries – treasury, public works, mining, planning and development and production – and other small companies made their case why Jindal should pay higher royalty to the government.

Jindal had bagged the rights to mine half of El Mutun's probable iron ore reserves on June 2. The contract established the company would pay royalties to Bolivia for export of ore, finished steel and pellets.

The final contract was to be signed by July after submission of a detailed project report (techno-economic feasibility report) by Jindal.

According to the initial conditions, Jindal Steel was supposed to pay a royalty of 8-9 per cent for iron ore, 10 per cent for concentrate (pellets), 7 per cent for sponge iron and 5 per cent for steel, all on exports. Another clause was that the surplus production will be exported only after catering to the domestic market there.

Apart from developing the mines, JSPL planned to set up a fully integrated steel plant with a capacity to produce 1.7 million tonne per annum (mtpa) of long products, 6 mtpa of sponge iron and 10 mtpa of pellets, and supporting infrastructure, including a 400 mw power plant and a rail or road link to the nearest river port.

It was expected to provide direct employment to 2,000 people and indirect employment to 10,000 people in Bolivia – South America's poorest country.

BS Bureau in Mumbai