‘Frustrated’ by delays, Australian clean-tech firm

threatens to pull out of India venture

M RameshUpdated onJanuary 12, 2019

It is not for the first time that Environmental Clean Technologies (ECT), an Australian company that owns intellectual property for using lignite in steel making, has expressed its dismay at the huge and unexpected delays in its Indian venture.

But, while in the past the company entreated its shareholders’ patience by pointing out that working in India called for “polite persistence”, the language it has employed in another letter issued today shows that its patience is running out.

Ratification of the deal

In May 2018, after years of negotiations, ECT inked a joint venture agreement with two public sector undertakings — NLC and NMDC — for setting up a pilot project to make steel using lignite. If successful, the project, the first of its kind in the world, would establish a technology that is disruptive, resulting in significantly lower cost of steel production.

What has apparently got ECT’s goat is that the NMDC’s board, which was to ratify the ‘research collaboration agreement’ — the heart of the joint venture — in its meeting of January 8, did not even take up the issue. NLC has ratified it.

“The ECT Board has made it clear to our Indian partners that further unexpected delays will have serious implications on ECT’s ability to continue with the project,” the communication to the shareholders says.

NMDC had earlier promised ECT that the board would ratify the agreement on January 8, but later said that the board met to discuss only its buy-back programme.

“Clearly, this is an unexpected change in the process,” Jim Blackburn, the company’s Chief Operating Officer, has said.

ECT assures its shareholders that NMDC is still committed to the project and the PSU’s board would clear the agreement by this month end. “It is understandably frustrating for all parties when changes in these processes are necessarily made,” says the ECT letter. “The ECT board shares our shareholders’ disappointment in having missed another deadline.”

Three-way joint venture

The joint venture of ECT, NLC and NMDC — in which the Australian company holds 49 per cent with the rest shared equally between the two PSUs — is to set up a ₹150-crore plant to make steel by a process that uses cheap lignite, developed by ECT.

Iron ore exists naturally in the form of oxides and steel is produced by removing the oxygen from the ores (called ‘reduction’ in chemistry). The marriage between iron and oxygen is broken by introducing carbon, whereupon the oxygen divorces iron and goes with carbon. The traditional source of carbon is the costly coking coal.

ECT’s ‘matmor’ technology uses the wet, low-carbon and cheap lignite in the place of coking coal. Since lignite costs about a third of coking coal, the finished product, steel, is cheaper. ECT chose India because of the abundance of lignite here; it hitched up with the government-owned companies because they own lignite and iron ore mines.

It is pertinent to note that the ‘India Economic Strategy to 2035’ unveiled last year by the Australian High Commission in India, speaks of the immense potential that India offers Australian business, but also cautions them to the challenges.

“India is too complicated for its growth story to be linear. Its economic progress will be uneven and incremental, constrained by the political compromise demanded by a diverse democratic federation, held back by thinly resourced institutions, burdened by a bureaucracy too susceptible to arbitrary interference, dented by endemic corruption and shaped by a political tradition which puts much greater faith in government intervention than the efficiency of markets.”

Published onJanuary 11, 2019

https://www.thehindubusinessline.com/companies/frustrated-by-delays-australian-clean-tech-firm-threatens-to-pull-out-of-india-venture/article25972793.ece/amp/