In a major embarrassment for the Government, barely 24 hours after it announced 100 per cent FDI in telecom and hiked foreign inflows in other key sectors like defence production and asset reconstruction firms - it faced one of the biggest foreign investment pullouts in recent times with world’s largest steel maker ArcelorMittal on Wednesday announcing scrapping of its $12 billion (Rs 50,000 crore) steel plant in Odisha.
The company in a statement cited reasons like inordinate delays and problems in acquiring land and securing iron ore linkages behind the decision.Incidentally the development also comes just a day after South Korean steel major POSCO pulled out of its Rs 30,000-crore steel mill in Karnataka.Steel baron lakshmi Mittal-headed ArcelorMittal’s proposed plant in Odisha was among the biggest foreign direct investments India has attracted.
Two other plants - POSCO’s Rs 52,000 crore steel plant in Odisha and ArcelorMittal’s Rs 50,000 crore steel unit in Jharkhand - are the two other largest FDI projects in India and both of them are facing inordinate delays.“ArcelorMittal has met today (Wednesday) with the Government of Odisha’s Chief Secretary to inform him that the company has decided not to progress with its planned construction of an integrated steel plant and a captive power plant in the district of Keonjhar,” the company said in a statement.
However, the company will continue to pursue its other two projects in Jharkhand and Karnataka, it said, adding that “both of which are making steady progress”.In 2006, ArcelorMittal had signed a memorandum of understanding (MoU) with the Odisha Government to set up a 12-million tonne steel plant in four phases at Keonjhar, entailing an investment of $12 billion (Rs 50,000 crore).
The MoU was due for renewal since December, 2011. “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, Executive Vice President and member of the Management Committee, CEO of India and China for ArcelorMittal.
Since the announcement of the project, the company said, that it had completed important milestones such as the completion of a feasibility report, an environmental impact assessment study and other relevant technical reports.Besides, it also holds eight gram sabhas (public hearings) and invested in a number of corporate social responsibility (CSR) projects, it added.
“However, unfortunately the project has faced significant external delays. ArcelorMittal has not been able to acquire the requisite land for the steel plant, nor has it been able to ensure captive iron ore security, which is a necessary requirement for the project,” the statement said while giving reasons for scrapping the project.Unlike its Odisha project, ArcelorMittal’s Karnataka project’s progress has been much better, where the land acquisition has been completed and the company is now waiting for securing iron ore linkages. The company has plans to set up a 6-million tonne steel plant in the State for about Rs 30,000 crore along with a captive power plant.
The firm has also made some headway in Jharkhand where part of the required land has been acquired. Besides, it is also prospecting iron ore mines in Karampada region of the state. In 2005, it had signed an MoU with the Jharkhand government for setting up a 12-million tonne steel plant at an estimated investment of $12 billion (Rs 50,000 crore). later, it decided to bifurcate its original plan into two 6 million tonne plants at two different locations in the State.