MoU betwen TATA STEEL and GOVERNMENT OF CHHATTISGARH on dated 4th June,, 2005

Reproduced version of MOU
inked by Tata Steel with Govt. of Chhattisgarh

MEMORANDUM OF UNDERSTANDING

between

THE GOVERNMENT OF CHHATTISGARH

and

The TATA INRON AND STEEL COMPANY LIMITED

at Raipur

dated 4th of June, 2005

This Memorandum of Understanding is made on the 4th day of June 2005 between the Government of Chhattisgarh on the one part and the Tata Iron and Steel Company Limited on the other part.

1. The State of Chhattisgarh endowed with abundant mineral resources and adequate water resources, has immense potential for industrial development. The Government of Chhattisgarh recognizes the need to safeguard their long-term strategic interests along with the State’s environment and culture, while embarking upon a path of rapid economic growth. The Government of Chhattisgarh is, therefore, desirous of creation of a favourable investment opportunity of facilitating the setting up of industrial ventures in the State by responsible corporate houses with proven track records.

2. The Tata Iron and Steel company Limited has its registered office at Bombay House, 24, Homi Mody Street, Mumbai 400 001 (hereinafter referred to as Tata Steel, which expression shall, unless repugnant to the context or meaning thereof, include its successors, executors, administrators, representatives and assignees.)

3. Tata Steel greatly values its association with the State of Chhattisgarh and its people and is keen to strengthen this bond by significantly contributing to the rapid industrialization and economic development of the State. Towards that end Tata Steel plans to set up an integrated steel plant of five million tones per annum capacity in the State in phases. The first phase of the steel plant consisting of two million tones per annum capacity is likely to be set up within 48 months to 60 months from the date of receiving of statutory clearances and the second phase of the steel plant will be set up within 36 to 48 months from the date of completion of the first phase. Tata Steel will submit the timelines for the two phases within 3 months of signing of the Memorandum of Understanding. The steel plant will employ a large work force at full operation and will lead to an even larger scale indirect employment, arising out of numerous services that a steel industry generates. The steel plant will also contribute substantially to the State exchequer both directly and through the enhanced level of industrial activity in the State.

4. The Government of Chhattisgarh and Tata Steel have, therefore, come together to record their intentions through this Memorandum of Understanding (MOU).

5. The proposed steel plant at Chhattisgarh will have a capacity of approximately two million tones per annum in the first phase with a provision of expansion to a total capacity of approximate five million tones per annum at a later stage.

6. This MOU reaffirms the commitment of Tata Steel for establishing an integrated steel plant and the commitment of Government of Chhattisgarh for providing suitable land, iron ore, coal, limestone, dolomite, other minerals required for steel manufacturing at present or in future and infrastructure facilities including required linkages for the purpose.

7. Tata Steel requires the help and co-operation of the Government of Chhattisgarh in several areas to enable it to construct, commission and operate the steel plant. The Government of Chhattisgarh agrees to extend all help and co-operation in the following major areas.

I- Land:

(a) For the purpose of setting of the integrated steel plant and associated facilities, Tats Steel will require approximately 2,500 acres land. Based on preliminary study, Tata Steel has identified the propose site at Salepal and Barupata at Bastar District. In the event any difficulty arises to obtain clearances for the proposed project at the said site, or the proposed site is not found suitable after the detailed feasibility study, the Steel plant would be set up at an alternate location in the same region, as mutually agreed between the State Government and Tata Steel. Any payment made by Tata Steel towards government land, compensatory afforestation, net present value, etc, at Salepal and Barupata would be adjusted towards payments for the land at the alternative location. Private land acquired by the Chhattigarh State Industrial Development Corporation (CSIDC) for the steel project would be transferred to Tata Steel, free of all encumbrances whatsoever. The location and the area for the township will be identified and indicated by Tata Steel to the Government of Chhattisgarh in due course of time.

(b) Tata Steel will communicate the exact details of the required land to Government of Chhattisgarh. The Government of Chhattisgarh will hand over the land to Tata Steel within a period of six to nine months of the receipt of formal application by the State government for allotment of land, free from all encumbrances whatsoever, for construction of the steel plant, allied facilities and township. The required land would be handed over to the Tata Steel on long term renewable lease of 99 years for which a lease deed will be executed and registered as required under the Indian Registration Act. The Government of Chhattisgarh / CSIDC will take expeditious steps to obtain all statutory clearances for the proposed site required under the Environment Protection Act, 1986 and the local applicable laws.

(c) The land identified by Tata Steel at Salepal and Barupata comprises of the following three categories

1) Private Land including some abadi areas:

2) Government land attracting the provisions of Forest Conservation Act

3) Other Government (revenue) land

In respect of Private Land, Tata Steel shall, on receiving written request from CSIDC, deposit the requisite amount as per law with the CSIDC immediately prior to the passing of award by the appropriate authority.

In respect of government land attracting the provisions of Forest Conservation Act, 1980, Tata Steel shall on receiving written request from CSIDC, deposit with CSIDC the amount payable as per rules towards fees, net present value, compensatory afforestation etc, as and when such amounts are required to be paid to the statutory agency (ies).

In respect of the rest of the government land, payment will be made by Tata Steel at the time of execution of the lease deed in favour of Tata Steel for the entire land mentioned in 1), 2) and 3) above.

d) For avoidance of doubt, it is clarified that while the State Government / CSICD and Tata Steel would complete all steps to acquire the land at 1),. 2) and3) above, the actual acquisition and the payment for the land would be made by Tata Steel only upon detailed feasibility being established for the above site and written communication is sent by Tata Steel to the State government to this effect.

e) In addition, the Government of chhattisgarh agrees to make available, land required for power transmission lines, roads, railway lines, water and other service pipelines etc., The cost of land and connected other payment will be borne by Tata Steel.

f) All the land required for this project, shall be allotted to Tata Steel on long term renewable lease of 99 years.

II – Iron Ore mines and coal mines

The Government of Chhattisgarh and Tata Steel recognizes that while State of Chhattisgarh is ideally suited for setting up a coal based steel plant because of availability of iron ore and coal in the State; steel can be manufactured at competitive cost only if captive iron ore reserves are allotted for the project and the project’s coal requirement is available at a cost that will meet the cost competitiveness of the project. The parties to the MOU recognize that allotment of suitable iron ore reserves within the State and availability of required coal reserves for the project are condition precedent for setting up the steel plant.

A. Iron Ore Mines.

a) The Government of Chhattisgarh recognizes that allocation of captive iron ore reserves is critical for the setting up of the steel plant.

b) The Government of Chhattisgarh recognizes that over the 50 year life of the integrated steel plant in Chhattisgarh, Tata Steel will require around 500 million tones of mine able iron ore reserves. The government of Chhattisgarh has identified two ranges, Bailadila and Rowghat for the proposed steel plant and agree to meet the requirement of iron ore of Tata Steel as follows:

1. Recommend, subject to statutory provisions, grant of mining lease in favour of Tata Steel for Bailadila Deposit –I (said to contain geological reserves of approximately 140 million tonnes) or any other equivalent deposit (s) as mentioned herein below.

2. Recommend, subject to statutory provisions, grant of mining lease in favour of Tata Steel for iron ore deposits of Rowghat Deposits (said to contain geological reserves of approximately 250 million tonnes) or any other equivalent deposit (s) as mentioned herein below. The Government of Chhattisgarh will help and assist Tata Steel for getting mining lease over the above mentioned said iron ore deposits.

3. Recommend / facilitate linkage or iron ore from National Mineral Development Corporation to meet the balance requirement, if any.

The State Government of Chhattisgarh appreciates that for the phase one of the steel plant, 200 million tones of mine able reserves of iron ore is required. The State Government would, immediately after the receipt of application for allotment of land from Tata Steel, send its recommendation forthwith for allotment of mining lease in favour of Tata Steel for Bailadila Deposit –I or any other equivalent deposit (s) and so much of Rowghat deposit that the mining leases recommended meet the requirement of the above 200 million tones.

Upon submission of the timelines for the phase two of the steel project,. Or immediately after the commencement of physical work at the site for the first phase of the project, whichever is later, the State Government will send recommendation to the Central Government for allotment of mining leases in favour of Tata Steel for the balance quantity mentioned in 6) 1. and 6) 2. above.

c) The Government of Chhattisgarh will assist Tata Steel in obtaining all clearances, including environment and forest clearances from the State Pollution Control Board, and the Ministry of Environment and Forests, Government of India under the Environment (Protection) Act 1986 and under the Forest (Conservation) Act 1980 for opening up the iron ore mines, laying roads, and constructing townships etc.

d) Tata Steel will invest in plant and equipment for mining of iron ore.

B. Coal Mines

a) The Government of Chhattisgarh recognizes that allocation of captive coal reserves is critical for setting up the steel plant and manufacturing steel at competitive cost.

b) The Government of Chhattisgarh recognizes that Tata Steel requires around 500 million tones of mine able coal reserves, preferably open cast, to meet the requirements of the proposed integrated steel plant in Chhattisgarh. Tata steel is in the process of identifying the coal blocks with the desired quality of coal. The Government of Chhattisgarh agrees to extend to Tata Steel such assistance as may be necessary / required under the applicable law and policy of government of India on the subject, for acquiring the coal blocks identified by Tata Steel, for the proposed integrated steel plant complex in Chhattisgarh.

The assistance of the Government of Chhattigarh would include acquisition of coal blocks and assigning these to Tata Steel, or formation of joint venture directly with Tata Steel or through Chhattisgarh Mineral Development Corporation or in any other manner as permitted by the policy of Central Government in this regard.

c) To fulfill the requirement of coal for the integrated steel plant project, the Government of Chhattigarh agrees to recommend grant of prospecting license/mining leases for captive use over such areas as may be available in the State of Chhattisgarh for this purpose in line with the applicable law and policy of the Government of India for allocation of coal blocks for captive use for the steel sector projects.

d) Until the captive coal mines are made available to Tata Steel, Government of Chhattisgarh will help and assist Tata Steel to secure adequate supply of coal to the proposed steel plant in Chhattisgarh through linkage (s) from coal companies including South Eastern coalfields Limited (SECL).

e) The Government of Chhattisgarh will assist Tata Steel in obtaining all clearances, including environment and forest clearance from the State Pollution Control Board, and the Ministry of Environment and Forests, Government of India under the Environment (Protection) Act 1986 and the Forest (Conservation) Act 1980 for opening of the coal mines, laying roads, rail, constructing township etc.

f) Tata Steel will invest in plant and equipment for mining of coal.

III- Limestone

The Government of Chhattisgarh recognizes that Tata Steel requires at least 65 million tones of limestone reserves to meet the requirements of the proposed integrated steel plant in Chhattisgarh, Tata Steel is in the process of identifying the limestone blocks with the desired quality of limestone. The Government of Chhattisgarh agrees to recommend the blocks identified by Tata Steel, for captive use of the proposed integrated steel plant complex in Chhattisgarh. The Government of Chhattisgarh will grant in favour of Tata Steel mineral concessions for limestone bearing area for the State of Chhattisgarh to identify the required quality of limestone and fulfill the above requirement.

IV- Dolomite

The Government of Chhattisgarh recognizes that Tata Steel requires at least 10 million tones of dolomite reserves to meet the requirements of the proposed integrated steel pant in Chhattishgarh. Tata Steel is in the process of identifying the dolomite blocks with the desired quality of dolomite. The Government of Chhattisgarh agrees to recommend the blocks identified by Tata Steel, for captive use of the proposed integrated steel plant complex in Chhattisgarh. The Government of Chhattisgarh will grant in favour of Tata Steel mineral concessions for dolomite bearing areas for the State of Chhattisgarh to identify the required quality of dolomite and fulfill the above requirement.

V - Other Minerals

The Government of Chhattisgarh agrees to assist/ recommend that Tata Steel be allocated /allowed to acquire mining lease for other minerals required for captive use of the steel plant operations.

VI - Water

a) The requirement of water for the steel plant is estimated at 35 MGD at a capacity of five million tones of steel per annum. The Government of Chhattisgarh agrees to allocate the required quantity of water from any suitable river(s) as identified by Tata Steel, in close proximity to the proposed site. The requirement of water will proportionately increase in line with the increase in steel production.

b) The Government of Chhattisgarh agrees that it will facilitate all required permissions / clearances for the construction of weir on the river source identified by Tata Steel.

c) The Government of Chhattisgarh agrees to give requisite permissions/ clearances to Tata Steel to build necessary infrastructure to pump required amount of water for the operation of the steel plant and township and the Government will grant permission for the same.

d) The requirement of water during the construction phase is estimated at 5 MGD. The Government of Chhattisgarh agrees to allocate to Tata Steel this requirement of water from nearby sources/ground water sources etc.

e) The Government of Chhattisgarh will allow Tata Steel to lay necessary pipelines for supplying water to its plant and township. If additional land is required for the purpose, government of Chhattisgarh will provide necessary assistance. The cost of such land will be borne by Tata Steel.

f) The Government of Chhattisgarh agrees to allocate to Tata Steel the requirement of water for the iron ore mines for mining and allied operations, as well as for townships to be established in these areas, from any suitable source (s) in close proximity to the proposed site identified by Tata Steel. The Government of Chhattisgarh further agrees to facilitate the drawl of the allocated water for this purpose from the identified source (s) by Tata Steel.

VII - Power

a) The Government of Chhattisgarh agrees to arrange for supply of power to the steel plant through Chhattisgarh State Electricity Board (CSEB) / distribution licensee. The requirement for the first phase will be about 322 MVA. The details of the year-wise build up of power requirement will be worked out by Tata Steel and indicated to the Government of Chhattisgarh / distribution licensee.

b) The power requirement at the construction stage is estimated at 10 MVA. The Government of Chhattisgarh agrees to arrange to supply the required power through CSEB / distribution licensee.

c) The Government of Chhattisgarh agrees to arrange for supply of the required power through CSEB/ distribution licensee for the water supply, township and mines.

d) Tata Steel may install a power plant by itself or through a joint venture or otherwise to augment the supply of power to the steel plant and allied activities. The Government of Chhattisgarh agrees to provide all necessary assistance to clear such a power project. The Government of Chhattisgarh also agrees to give Tata Steel right to receive power from CSEB / distribution licensee and distribute the same along with the power to be generated by the power plant to the steel plant complex, Tata Steel/joint venture partner will be permitted to transmit and supply/sell or deal with the power from the power plant, as and when the need arises, to its other units/industries/CSEB/distribution licensee or any other consumers as permitted under the Electricity Act 2003.

e) The power plant proposed by Tata Steel may also use coal for power generation. The Government of Chhattisgarh agrees to extend such assistance / make recommendations for the grant of necessary coal mining leases to Tata Steel, as may be necessary under the applicable law and policy of the Government of India in this regard.

VIII - Railways and Roadways

a) The Durg – Rowghat- Bailadila – Jagdalpur railway line is the essential link for transportation of minerals and it is, therefore, necessary that this link, be established as soon as possible. Government of Chhattisgarh will pursue with the Government of India, Ministry of Railways, for the completion of the Durg – Rowghat- Bailadila – Jagdalpur railway linkage. Tata Steel has been given to understand that the project for the construction of this Railway line forms a part of the plan of the Central and the State Governments. – Rowghat- Bailadila – Jagdalpur railway is taking proactive measures for early commencement of implementation of the approved project.

b) The Government of Chhattisgarh will make available necessary land for railway link from the nearest railhead to the mines and steel plant for transportation of raw materials and finished goods. Tata Steel will pay for the cost of such land as per rules.

c) The Kirandul – Kottavalasa railway line is important for movement of raw materials and finished goods, for the proposed integrated steel plant. The Government of Chhattisgarh and Tata Steel would follow-up with the Ministry of Railways for strengthening and development of adequate rail network, in Bailadila – Vishakapatnam area capable of movement of traffic keeping in view the increase in traffic in this area. The Government of Chhattisgarh will recommend to the Union Ministry of Railways to accord priority for the movement of the goods for the proposed integrated steel plant on this route. Strengthening the railway network for raw materials movement into the steel plant and finished products movement out of the steel plant is fundamental to the economic viability of the steel plant.

d) The Government of Chhattisgarh agrees to allow Tata Steel to strengthen approach roads to the steel plant as well as connection service roads to the iron ore and coal mines.

IX - Monetary and Fiscal Concessions / Incentives

The Government of Chhattisgarh appreciates that for a major steel plant and its associated facilities(i.e. township, mines etc.) such as being proposed by Tata Steel, financial viability is of critical importance. Therefore, the Government of Chhattisgarh agrees that Tata Steel will be entitled to all financial concessions and incentives as per the applicable Industrial Policy Resolution (IPR) of the Government of Chhattisgarh. Tata Steel understands that the concessions available to these projects under the relevant IPR will not be adversely affected by subsequent changes in the IPR.

Keeping in view the special nature of the project, due to its high level of investment, and having regard to the fact that the project is supposed to be set up in the most backward region of the State, the State Government will consider grant of benefits/concessions available under the Industrial Policy of the State Government for a period longer than the period provided for the said policy.

X - Environment

a) The Government of Chhattisgarh agrees to assist Tata Steel in obtaining no objection certificate (NOC) through the State Pollution Control Board for the construction and operation of the plant, the housing colonies, mines, water supply infrastructure, power projects etc.

b) The Government of Chhattisgarh agrees to assist Tata Steel in obtaining all clearances from the Central Government.

c) Tata Steel will arrange to conduct a rapid Environment Impact Assessment (EIA) and detailed EIA and prepare an Environment Management Plan (EMP) for the project. The Government of Chhattisgarh agrees to extend any assistance sought during the time the EIA is conducted and the EMP is prepared.

d) Tata Steel shall install state-of-the-art pollution control equipment and take all possible steps to manage the environment effectively. Tata Steel has been a pioneer in this field and would not only endeavor to continue this effort but would accelerate its effort keeping in mind its pioneering stature.

e) In the event any forest land is required to be diverted for industrial purpose, the Government of Chhattisgarh will make available such Government revenue land for compensatory aforestation as may be required under the law.

8. The area of co-operation mentioned above highlight only the major issues involved in setting up of the steel plant. Other issues, as and when they arise, and sharing of the responsibility between both parties shall be decided through mutual agreement on a case-to-case basis. In general, the Government of Chhattisgarh agrees to render all assistance to Tata Steel and its affiliates in establishing the steel plant and is associated facilities (i.e. township, mines etc.).

9. The Government of Chhattisgarh appreciates that the “House of Tata” is a responsible corporate house with high involvement in employee welfare and social development. The Government of Chhattisgarh therefore, expects that Tata Steel will bring this philosophy to the steel plant project being set up at Chhattisgarh, to ensure the well being of the people of the adjoining areas in particular and the people of Chhattisgarh in general.

10. Any information exchanged shall be kept confidential and may only be used by either party, its employees, consultants (including affiliate companies, employees and consultants) for the purposes of the review and at no time shall the information be provided to the third parties during the period of this MoU or after the expiry of the MoU, unless such information is:

a. In public domain at the time of disclosure to the third party or thereafter enter the public domain without breach of the terms of this MOU.

b. Is already known by the parties at the time of disclosure.

c. Is developed independently and in good faith by or on behalf of the parties for the purpose of this MOU.

d. Becomes known from a source unconnected with either of the Parties hereto without breach of the terms of this MOU.

e. Or disclosed in response to any interrogatory or order issued by any administrative agency, Government body or court provided, however, that whenever possible a notice will be given by the party to other party within a reasonable time.

f. Except as required by law or regulation neither party shall disclose to any third party the content or nature of their discussions without the prior consent of the other party.

11. The Government of Chhattisgarh and Tata Steel agree to meet periodically and inform and update each other on the developments and steps taken by the respective parties concerning facilitation/implementation of the project.

12. The Government of Chhattisgarh with its natural resources will attract industries, especially the steel industry and steel based industries. Establishing a steel plant, however well endowed a State may be with natural resources, is a very challenging task with many complexities in actual implementation. In view of this, the Company entering into MOU for establishing a steel plant will need a comfort that the raw material sources promised and committed for the steel plant is not promised or committed for any other steel project during the pendency of the MOU or completion of feasibility study and firming up the decision to set up the plant, which ever is later. Tata Steel seeks such an assurance from Government of Chhattisgarh and Government of Chhattisgarh assures such a comfort.

13. This MOU is an instrument of understanding and shall be valid for three years from the date of signing the MOU. Further extensions, if necessary, shall be as peer mutual agreement. This MOU will be converted into formal agreements with the concerned agencies/departments of the State Government in due course.

14. If implementation of this MOU and /or performance of any of the obligations of any Party hereto is prevented, suspended, delayed, restricted , and /or interfered with by reason of force majeure, such as but not limited to acts of god, typhoons, storms, tidal waves, earthquakes, floods, fires, accidents, epidemics, strikes, riot, civil commotions, sabotage, insurrection, rebellion, hostilities between nations, war, embargoes, actions by any relevant governments, or any subdivision, instrumentality, entity, and /or agencies of any relevant government or any relevant laws, decrees, orders, rules and/or regulations, and such other similar contingencies beyond the reasonable control of the Party concerned, the Party so affected shall, upon prompt written notice to the other Party, be excused from the performance of its part or parts of this MOU but only to the extent of such prevention, suspension, delay, restriction, and/or interference. In all cases, the Party so affected shall, however, exert its best efforts to avoid, remove and /or forestall such causes of non-performance and to remedy and complete performance with utmost dispatch.

Signed on the date mentioned herein above at Raipur, by the authorized representatives of the parties to this Memorandum of Understanding.

For and on behalf of the Government of Chhattisgarh

S/d
(Shivraj Singh,
Principal Secretary, Industries and Mineral Resources Department)

For and on behalf ofThe Tata Iron and Steel Company Limited

S/d
(B. Muthuraman,
Managing Director)
Tata Steel


Witness
Signature: S/d
Name: S.K.Gupta
Designation: Addl. Director Industries , Govt. of Chhattisgarh


Witness
Signature: S/d
Name: T. Mukherjee
Designation: Dy. M.D. (Steel)
Tata Steel