NEW DELHI (AP) - ArcelorMittal, the world’s largest steelmaker, has
abandoned plans for an $8.5 billion steel plant in eastern India in the
second major blow this week to the government’s efforts to lure foreign
The company said Wednesday it decided to scrap the steel plant in Orissa
state after a seven year delay in acquiring land. Its decision came a day
after South Korean steel giant Posco dropped plans for a steel plant in
southern Karnataka state.
ArcelorMittal said the failure of the state to allocate iron ore fields and
delays in land acquisition meant the project was no longer viable.
The global steel industry is also suffering from slower growth in demand as
Europe remains in recession and the economies of India and China have
The company’s decision is a setback for the Indian government, which had
been trying to woo foreign investment to spur a slowing economy. India’s
Finance Minister Palaniappan Chidambaram was in Washington D.C. last week
making a strong pitch for investment in India.
ArcelorMittal and the Orissa government signed an agreement in 2006 to
produce 12 million metric tons (13.2 million U.S. tons) of steel a year with
iron ore to be mined locally.
ArcelorMittal officials met with the state’s top bureaucrat Wednesday to
inform him of the company’s decision. The project also had involved building
a power plant to serve the steel facility.
“Over the last seven years we have invested considerable resources into this
project. However, the delays relating to land acquisition and allocation of
captive iron ore blocks means this project is no longer viable,” said Vijay
Bhatnagar, CEO of ArcelorMittal’s India and China businesses.
The company, however, said it would go ahead with two other projects in
Jharkhand and Karnataka states.
Difficulties in getting environmental clearances, bureaucratic delays and
conflicts between state governments and local communities over land
ownership have made India unattractive for companies planning large
capital-intensive industrial investments.
Despite shelving its Karnataka plans, Posco on Tuesday said it would go
ahead with a separate $12 billion steel plant in Orissa, which is India’s
biggest foreign investment ever. That project too has been hit by snags in
getting environmental clearances and land.
The government on Tuesday further eased restrictions on foreign ownership in
several industries, part of its efforts to pull Asia’s third-largest economy
out of a downward spiral of declining demand, high interest rates and a
The withdrawal by the two steel companies was a reflection of a decline in
the global demand for steel, said A.S. Firoz, an Indian steel expert.
“China is slowing down. In India, demand is down. This is not the best time
for steel companies to feel greatly confident. Slowing demand makes it
difficult for companies to mobilize funds,” Firoz said. “The investment
climate is bad everywhere. And in such a situation, companies will take a
cautious approach in a high capital costs industry.”