Gujarat government sources told that the proposed SEZ would be spread over 1,100 hectares of land adjacent to Essar's existing project site. When contacted, an Essar spokesperson said in an e-mailed statement, "We will not like to comment on this matter."
The Essar Steel has approached the ministry of commerce for an in-principle approval of the project. Essar has also sought support from the Gujarat government for the proposed SEZ.
Essar has estimated an additional investment of Rs 400 crore (Rs 4 billion) for setting up the SEZ's infrastructure.
If it materialises, the SEZ will be the country's first for steel and the second dedicated zone in the state after Reliance Industries' SEZ at Jamnagar, set up for the petrochemical industry.
Essar Steel plans to set up a new integrated steel plant and a power project at the proposed SEZ. Although the size of the proposed steel plant was not known, it was likely to be over six million tonnes, sources said.
The plant, when set up, will aim mainly at meeting a part of China's rising demand for steel. The captive power project will use natural gas and is likely to be an independent power project with a capacity of between 600 mw and 1,000 mw, depending on the size of the steel plant.
Essar Steel plans to have a product-specific zone at the initial stage, to be converted into a multi-product zone later. The company's board is expected to take up the matter for consideration next month.
The proposed facility will add capacity to Essar's steel plant at Hazira and will help the company cater to the increasing demand for steel products worldwide.
The Hazira project has a capacity of 3 million tonnes per annum and the company has plans to increase it to 4.6 million tonnes and 5.5 million tonnes in stages by the end of 2006.
The proposed SEZ is expected to consume nearly the entire pellet production of Essar's 4 million tonnes pelletisation plant located at Visakhapatnam.
Currently, the Visakhapatnam plant exports part of its production to global buyers and also sells to domestic customers. With the proposed facility, Essar Steel's captive consumption of pellets will nearly double, and this may force the company to look for additional supply from other sources.
