Uncertainty shrouds revival of sponge iron plant in Kothagudem’s Paloncha

Despite a 2017 proposal to establish a steel plant at Paloncha, the revival of NMDC’s sponge iron unit remains stalled, with local leaders and unions renewing their demand for urgent action

Kothagudem: The Central government’s proposal made in 2017 to establish a 1.5 million tonne scrap-based steel plant at Paloncha, which had raised hopes for the revival of the sponge iron plant here, is yet to see the light of day.

It may be noted that Sponge Iron India Limited (SIIL) was the first coal-based sponge iron plant in South Asia and came into commercial production in 1980 with a capacity of 30,000 tonnes per annum.

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It was set up with the assistance of the United Nations Industrial Development Organisation (UNIDO) under the United Nations Development Programme (UNDP). A second plant with the same capacity was set up indigenously and came into production in 1985.

SIIL was merged with NMDC Limited on July 1, 2010, after the government had approved June 30, 2008, as the appointed date for the merger. It is now called NMDC Limited, Sponge Iron Unit (SIU), Paloncha.

In December 2017, the then Union Minister of Steel, Chaudhary Birender Singh, speaking at the diamond jubilee celebrations of National Mineral Development Corporation (NMDC) in Hyderabad, said the Ministry would establish a steel plant on 450 acres of land belonging to the defunct NMDC SIU, Paloncha.

His announcement came close on the heels of the plant’s shutdown in the third quarter of 2017 due to administrative reasons. For the new facility, a joint venture with the State government or a PPP mode was said to be under consideration, and NMDC was asked to conduct a detailed study. Eight years have passed since the minister made the proposal, but no progress has been made.

The issue of reviving the sponge iron plant is now coming to the fore again. Kothagudem MLA K Sambasiva Rao and several local trade unions are demanding the revival of the SIU. Industries Minister D Sridhar Babu recently met Union Minister for Heavy Industries and Steel, HD Kumaraswamy, in New Delhi and appealed for the revival of the SIU.

In January 2019, NMDC restarted operations at the sponge iron unit, but it ran for only a couple of months. Speaking to Telangana Today, a former president of the AP Steels Employees Union, Sravanaboina Narsaiah, said the revival of the sponge iron plant is essential for the industrial growth of Kothagudem district and urged the government to also revive the defunct AP Steels Limited plant at Paloncha.