Kareem's Mineral Sand Business
While the historic resistance against the proposed disinvestment in the Bharat Aluminium Company and Neyveli Lignite still lingers in public memory, Pinarayi Vijayan’s ‘new-age’ communists in Kerala — who claim to be champions of public sector units (PSU) — are adopting a new path that is diametrically opposite to the future of PSUs.The Kerala Minerals and Metals Limited (KMML), the state’s second largest profit-making PSU and the world’s leading manufacturer of titanium dioxide, is fast turning out to be the first victim. Kerala’s industry department is impeding KMML’s development by permitting a Russian firm with questionable credentials to exploit the rich mineral sand deposit on the state’s coast. It is also wooing Tata Steel to the same sector by offering a number of incentives. Top industry sources feel the entry of both the companies would jeopardise KMML’s growth and threaten its very survival. The KMML staff expectedly is worried. So are members of the opposition parties. Worse, even the CPM’s allies have expressed fear over the “unilateral” decision of Industry Minister Elamarom Kareem, a trusted Vijayan lieutenant.
The row over the CPM’s new preference for private investment started with the signing of a memorandum of understanding (MoU) by the state government with Russian company Rosoboron to set up a Rs 1,400-crore titanium sponge plant within the KMML compound at Chavara in Kollam district. “The MoU wasn’t discussed within the Left Democratic Front. We don’t know the details of the MoU as it was not officially circulated among the Front partners,” points out TJ Chandra choodan, state secretary, Revolutionary Socialist Party.
Congress MLA VD Satheesan says Rosoboron is controlled by the Russian mafia. “They want to steal our mineral sand and technologies. Tata, which plans to set up a pigment division at Thoothukkudy (Tamil Nadu), is after the same,’’ he told TEHELKA. The row has cast a shadow over the future of KMML, the world’s only integrated titanium dioxide facility with mining, mineral separation, synthetic rutile and pigment-production plants.
KMML executives are livid. One executive, speaking on the condition of anonymity, says the Left Front government thwarted KMML’s expansion activities worth Rs 782 crore to roll out the red carpet to Tata and Rosoboron. It was under the previous Left government that had Suseela Gopalan as industry minister, that the expansion had been sanctioned. The Congress-led UDF government that succeeded it, had in principle decided to invite global tenders for international collaboration to produce titanium sponge at KMML, and to write to major players in the field inviting them to participate. The decision had the ratification of the industry department and the company’s board of directors. However, no global tender was invited by the present government before signing the MoU with Rosoboron. No letter was sent out. The company signed the deal on May 17 this year in a secretive manner. Kareem claims the Russian plant would cost around Rs 1,500 crore. Tata is investing an equal amount a short distance away in Pallipuram in Alapuzha district to start a similar plant.
What is strange is the government’s decision to terminate the modernisation of KMML, which was recommended by two separate legislative committees, before the deal with Tata and Rosoboron. KMML sources say that the government splurged Rs 120 crore on the modernisation. Leader of the opposition Oommen Chandy believes Tata is eyeing Kerala’s mineral sand and KMML’s unique chloride technology. The opposition in Tamil Nadu against its proposed titanium unit at Thoothukudy is also forcing Tata to focus on Kerala.
PC George, leader of the Kerala Congress (Secular), says Rosoboron has nothing to do with the titanium sector. He says: “It is a weapons exporter with possible links to the Russian mafia...I have heard from official circles that it signed the MoU on behalf of Russian MNC Avisma. Roso boron is a front for the government to enter into a tacit deal with Avisma that has a monopoly in the titanium sector and controls over 30 percent of the world’s titanium deals.” Both the proposed units require mineral sand worth Rs 10 lakh a year. The understanding between the companies and the Kareem is to make KMML the two giants’ feeding unit. KMML’s fortunes started crumbling after Kareem assumed office. Balasubramaniam, a bureaucrat appointed by him as KMML managing director earned the wrath of Centre of Indian Trade Unions workers, who alleged inefficiency and corruption, while he was in charge of the public sector Malabar Cements. The decrease in import duty on titanium dioxide pigment from 145 percent to 10 percent landed the company in an unprecedented crisis. It had sought the modernisation drive to decrease the price of titanium pigment dioxide from Rs 89,000 a tonne to Rs 65,000 to boost exports and compete with rivals. But the new MD’s decision to abandon the renovation in favour of Tata and Rosoboron have plunged it into another financial crisis.
The controversy has also affected the Indian Space Research Organisa tion’s planned joint venture with KMML to produce 10,000 tonnes of titanium sponge every year. Stronger than steel, this lightweight product has applications ranging from space research to health. India imports titanium sponge worth Rs 14,35,000 a year.
Kareem, who claims to be ready for any inquiry into the controversy, claims there is no link between the dropping of KMML’s modernisation programme and the MoU with the Rosoboron. The minister points out it was the government, not KMML which had signed the MoU with Avisma. “It was for the establishment of a separate plant, to be implemented through the MoU route,’’ he said. Referring to the criticisms that the project cost had gone up by Rs 300 crore, Kareem claims that it is Rosoborn, not KMML, which is investing the money. “Russia has the requisite advanced technology but not enough raw materials; we have raw materials and infrastructure.”
Kareem alleges corruption in the contract awarded to Delhi-based firm Mecon for KMML’s modernisation under the UDF. ‘‘The modernisation project was initiated by the former EK Nayanar ministry at an estimated cost of Rs 782 crore. But Mecon prepared a Rs 1,142 crore project. They gave sub-contracts to several MNCs without approval from the government or the board of directors,’’ says the minister.
Meanwhile, the opposition Congress that is campaigning against the deal found itself in an embarrassing spot last week when a senior defence ministry official made it clear that the Centre would give “full support” to Rosoboron’s titanium sponge project, by buying its products for the defence industry.
At a defence industry symposium in Kochi, Defence Production Secretary KP Singh called the MoU a major step. When it was pointed out that the Congress-led opposition was opposing the deal, he said: “We are a consumer and require the (titanium sponge) products that have various applications in the defence industry. We’ll buy them from whoever produces them.” Meanwhile, KMML’s fate hangs in the balance.