In the initial stage, JVSL had also held discussions with Grasim Industries and the BK Birla-controlled Kesoram Industries, but L&T is believed to be ahead in the negotiations by far.

At full capacity, JVSL will generate around 0.5 million tonnes of granulated slag which could be used to produce slag cement, and another 50,000 tonnes of fly-ash which can produce portland pozzolona cement.

A one million tonne grinding unit, which could cost around Rs 120-125 crore, will further enhance L&T's leadership position in South India. For, JVSL it will mean additional revenue by selling a process waste.

JVSL sources said that they were expecting to strike an arrangement at a price of around Rs 200 per tonne of slag. Initially, the entire slag from the unit, once the deal is struck, will be used by L&T for itstwo million tonne Tadapatri unit in Andhra Pradesh.

According to JVSL managing director JK Tandon, the company is in advanced stage of negotiations with L&T over the proposal to set up the grinding unit in the complex.

With the production of the steel plant already going on full swing, the company is exploring possibilities as to how to best utilise the amount of slag generated, he said.

World over, slag from the blast furnance is mixed with clinker to produce slag cement. Slag, which contains calcium oxide, alumina, and silicon oxide, is the residue waste formed from the iron oxide, in the iron-making process.

Fly-ash, which will be generated from the 2x130 mw captive power plant will also find an immediate offtake.