Mumbai: The new Labour government in the UK is willing to offer a bigger grant to Tata Steel if the company builds more downstream assets to employ some of the workers rendered jobless by the shuttering of its ageing blast furnaces.
The company is holding similar discussions with the Dutch government, where the country’s parliament has agreed to provide fiscal aid to the steelmaker to fund a similar transition at its IJmuiden-based mill, managing director T. V. Narendran said.
The Keir Starmer-led government in the UK has told Tata Steel that there’s more money on the table if the Indian steelmaker decides to invest in setting up new downstream assets at Port Talbot steelworks, Narendran said. This will be in addition to the £500 million in grants promised by the previous Rishi Sunak-led Tory government to help fund Tata Steel’s £1.25-billion transition to electric arc furnace (EAF) based steelmaking.
“Obviously, the expectation is that if they give us more money and we put up something more, then if not save jobs, we’ll create some more jobs,” Narendran said in an interview.
The new British government has agreed that shutting the blast furnaces was inevitable, as the old assets were not only financially unviable to run but also posed a safety risk, he said.
Progress in discussions with the UK government could help calm the nerves of Tata Steel investors amid speculation that the Labour party could go back on the £500 million grant promised by the Tories after months of negotiations. Saving jobs at Port Talbot was one of the poll promises of the Labour party.
“I think people acknowledge that saving the blast furnace is not the main point. The point is, can you create a sustainable business? Can you save some more jobs?” Narendran said. “The government is aligned (with us) on that subject, but still working with us to see what they can do to help us.”
Jonathan Reynolds, the UK government’s business secretary, did not respond to Mint’s emails seeking comment.
Going Dutch
Across the English Channel in the Netherlands, Tata Steel is expecting even more fiscal aid from the government that in the UK as the cost of transition would be higher there, Narendran said. In the Netherlands, Tata Steel will be installing a Direct Reduced Iron (DRI) plant and an EAF to cut down on emissions caused by its two blast furnaces.
The company expects the Dutch government to fund 40-60% of the transition cost, which is in line with what other European governments are offering steelmakers, according to Narendran.
“Fundamentally, there should be enough support to make it a viable business case,” he said. “If you look at the UK, the £1.25 billion project had no business case. But because the government is giving us £500 million, effectively, the cost for us is £750 million, so there’s a business case. In the Netherlands, it will be the same thing.”
The company expects to conclude the discussions by December. It plans to shut one furnace by 2030 and the second one, which was refurbished earlier this year, by 2035.
Weighing the benefits
In India, where Tata Steel is one of the oldest and largest miners, the company is closely watching the Supreme Court’s last week’s judgement regarding mineral rights of the states. A nine-judge Constitution bench held by an 8:1 majority that states have the power to tax mining in their territory and that the Centre’s Mines and Minerals (Development and Regulation) Act 1957 does not override this power.
The apex court has reserved its judgement on whether the verdict can be applied retrospectively, a decision that could potentially trigger thousands of crores of rupees of tax demands on miners.
The decision has made Tata Steel question if it should invest in captive mines for all its iron ore requirement, Narendran said. While the company has enough captive iron ore reserves to meet all its requirements till 2030, it is contemplating whether it should invest in more captive mines beyond that to continue meeting 100% of its iron ore needs.
“The key question is, do we really want 100% captive? Because you’re going to bid 100% premium to get the iron ore mine. Then on top of that, you have all these state taxes,” he said.
The company will weigh the benefits of having 100% iron ore demand met through captive mines versus a blend of captive mines and open market, he said.