Tata Steel and the UK government on Friday announced a joint agreement on a proposal to invest 1.25 billion pounds in state-of-the-art Electric Arc Furnace steelmaking at the Port Talbot site in Britain.

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The investment includes a grant of 500 million pounds from the UK government.

The project will bolster UK's steel security and it will be the first major step towards decarbonisation of the local steel industry, reducing direct emissions by 50 million tonnes over a decade.

Tata Group Chairman N. Chandrasekaran said: "The agreement with the UK Government is a defining moment for the future of the steel industry and indeed the industrial value chain in the UK.

It has been an absolute pleasure to work with His Majesty's Government and Prime Minister Rishi Sunak in developing the proposed transition pathway for the future of sustainable steelmaking in the UK.

"With a high degree of circularity the project would leverage strategic, domestically available scrap steel and promote local value addition within the UK."

"Tata Steel UK will soon commence consultation on the proposal and the transition period including potential deep restructuring for the carbon-intensive, unsustainable iron and steelmaking facilities at Port Talbot, where many of the existing 'heavy end' assets -- such as blast furnaces and coke ovens -- are reaching the end of their operational life."

The proposed project would also involve Tata Steel's Balance Sheet being restructured with potential elimination of the current cash losses in the UK operations and non-cash impairment of legacy investments.

During the transition period and project phase, Tata Steel UK would work intensively to ensure uninterrupted and reliable supply of products to fulfill customer and market commitments including through import of additional steel substrate from stable supply chains to feed its downstream units.

Tata Steel's Chief Executive Officer and Managing Director, T.V. Narendran said: "Tata Steel UK has been facing significant challenges due to the heavy end facilities approaching their end of life.

The proposed project, with one of the largest investments in the UK Steel Industry in recent decades, provides an opportunity for an optimal outcome for all stakeholders. We will work to transform Tata Steel UK into a green, modern future ready business."