UK govt can reclaim GBP 500 mn funding if Tata Steel fails on commitments

Posted by Admin September 13, 2024 Bussiness

3 min read Last Updated : Sep 13 2024 | 11:33 AM IST

The UK government said it can reclaim the funding allocated to Tata Steel if the company fails to meet its commitments, such as investing in new steel industry projects in the region and providing enhanced redundancy terms and skill packages for employees, according to a report by The Economic Times. The government has provided 500 million pounds as part of Tata Steel’s 1.25 billion pounds transition to a low-carbon electric arc furnace at Port Talbot, set to be operational within three years.

Tata Steel announced on Thursday in an exchange filing that it had signed a 500 million pounds grant funding agreement with the UK government to advance the installation of an electric arc furnace (EAF) at its Port Talbot steelworks in Wales. The 1.25 billion pounds green steel project aims to significantly reduce carbon emissions, with the EAF expected to cut the UK’s industrial carbon footprint by 8 per cent and reduce Port Talbot’s emissions by 90 per cent.

This move is part of efforts to modernise the UK steel industry and reduce carbon emissions, but the transition will lead to the loss of 2,800 jobs. Tata Steel has committed to offering its best-ever redundancy package, including a minimum voluntary payout of 15,000 pounds, a 5,000 pounds retention payout, and paid training for workers. Labour union Unite has expressed its intention to hold Tata Steel accountable to ensure that new investments are made in the region and that jobs are created.

The UK’s business and trade secretary, Jonathan Reynolds, highlighted that the government is taking decisive steps to reverse the stagnation of the steel industry, ensuring its sustainability and long-term future.

Tata Steel is contributing 750 million pounds to the project and is leveraging its global engineering expertise to ensure a smooth transition. Tata Steel’s CEO and managing director, T V Narendran, highlighted that this transformation, with the government’s support, has the potential to position Port Talbot as a premier hub for green steelmaking in Europe.

“I would like to thank the UK Steel Committee and various departments of the UK and Welsh governments for their support in reaching this agreement. We now look forward to the efficient and speedy execution of the EAF project. We will also continue our work with the Transition Board and the UK and Welsh governments to enable this project to be a catalyst for economic regeneration and job creation in South Wales,” Narendran said.

Public consultations are underway, with planning approvals expected by November 2024, and large-scale site work to begin by July 2025. The EAF is anticipated to be operational within three years.

Following the announcement, Tata Steel’s shares surged by up to 2.86 per cent, reaching an intraday high of Rs 152.40 on September 12, 2024. By 10.22 am, the shares were trading 1.52 per cent higher at Rs 150.40, while the BSE Sensex was up 0.30 per cent.

Shares of Tata Steel were trading at Rs 154.35, up 1.71 per cent on the BSE at 9.50 am on Friday.

First Published: Sep 13 2024 | 11:33 AM IST