MELBOURNE, Jan 31 (Reuters) - The Australian government has...

MELBOURNE, Jan 31 (Reuters) - The Australian government has awarded an energy transition grant worth A$63.2 million ($41.5 million) towards the purchase and commission of a new furnace at a Liberty steel plant in South Australia owned by commodities tycoon Sanjeev Gupta.

Liberty Steel is part of Gupta's family conglomerate, GFG Alliance, which has been refinancing its cash-starved businesses in steel, aluminium and energy after its backer, supply chain finance firm Greensill, filed for insolvency in March 2021.

The assistance comes as part of a $A200 million grant to two Australian steel companies to support their transition to using green energy to produce low-carbon steel.

"This $200 million investment in the steel sector is about securing the long-term future of the steel industry in Australia," said Energy Minister Chris Bowen.

“We want to make sure products vital to our economic future like green steel are made in Australia, but this will require innovation and new ways of processing iron ore that decarbonise our steel industry,” Bowen added.

The grant will go towards the purchase and commission of a low-carbon electric arc furnace to replace its blast furnace at the Whyalla Steelworks.

Australia's Bluescope Steel (BSL) will also tap a A$136.8 million grant to upgrade a blast furnace at the Port Kembla Steelworks, south of Sydney on Australia's east coast.

In addition to the new furnace, Liberty is planning to expand a magnetite project to produce green iron and steel using hydrogen, executive chairman Sanjeev Gupta said in a separate statement.

Australia has also committed A$200 million in grant funding for the hard-to-abate cement and lime, and alumina and aluminium sectors, its Department of Industry said.

Successful projects are to be announced in the coming months.

Rio Tinto (RIO) , Alcoa AA.N and South32 (S32) are the operators of Australia's seven alumina refineries. Alcoa said this month it is closing its aged Kwinana refinery.

($1 = 1.5242 Australian dollars)