Financial Daily from THE HINDU group of publications
Thursday, Nov 13, 2003
Tata Steel banks on carbon trading to fund expansion
New Delhi , Nov. 12
TATA Iron and Steel Company is banking on carbon trading to generate funds for its various modernisation and expansion projects at its steel works in Jamshedpur, over the next few years.
The company has lined up 12 projects involving an estimated investment of around Rs 3,700 crore. Of this, approximately Rs 800-crore investments is likely to be funded through carbon trading, company officials said.
Four projects involving a total investment worth Rs 2,200 crore are already under implementation. In this, Tata Steel has already received a commitment for Rs 125 crore from New Energy and Industrial Technology Development Organisation (NEDO) of Japan.
These projects pertain to waste heat recovery from blast furnace stoves, coke dry quenching, conversion of coal-fired boilers to by-product gas firing and modernisation and upgradation of the plant's capacity from 4 million tonne to 5 million tonne.
NEDO will provide technology and machinery worth Rs 125 crore for these projects. As part of the carbon trading agreement, Tata Steel will reduce carbon dioxide emission to the extent of 1,70,000 tonne while the credit for this reduction will go to Japanese companies.
Carbon trading is essentially a deal to offset one company's high carbon dioxide emission above permissible level by tying up with another company whose emission levels are lower than the permissible level. Together, the average would work out within the permissible level.
Another contract in the range of Rs 60-70 crore is being studied now, said Mr R.P. Sharma, head of environment management in Tata Steel. He said in the case of carbon trading, there is no real cash flow but the investments come in the form of technology and equipment.
The eight projects in the pipeline include replacement of blast furnaces, coke oven gas injection in two blast furnaces, waste heat recovery from ammonia incinerator, waste heat recovery from sinter cooler, hot charging of slabs in hot strip mill, energy efficient ignition furnace with side burners in sinter plants, vertical slag granulation facility and top gas recovery turbine for blast furnace.
"These eight projects will have much higher investments through carbon trading funds compared to the four now being implemented," Mr Sharma said and explained that in the ongoing projects worth Rs 2,200 crore, only around Rs 200 crore would be from carbon trading funds, which is less than 10 per cent of the total project cost.
"But for these eight projects, which are yet to be taken up for implementation, investments generated through carbon trading would be around 40 to 50 per cent of the estimated project cost of Rs 1,500 crore which would come to around Rs 600 to Rs 700 crore," Mr Sharma said.
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