ArcelorMittal SA, the world’s largest steelmaker, has abandoned plans for an US$8.5 billion steel plant in eastern India in the second major blow this week to the Indian government’s efforts to lure foreign investment.
The company on Wednesday said 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 Orissa authorities to allocate iron ore fields and delays in land acquisition meant the project was no longer viable.
The company’s decision is a setback for the Indian government, which has been trying to woo foreign investment to spur a slowing economy.
Indian Minister of Finance Palaniappan Chidambaram traveled to Washington DC last week to make a strong pitch for investment in India.
ArcelorMittal and the Orissa government signed an agreement in 2006 to produce 12 million metric tonnes of steel a year, with iron ore to be mined locally.
ArcelorMittal officials met with Orissa’s top bureaucrat on Wednesday to inform him of the company’s decision. The project also 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.
However, the company said it would go ahead with two other projects in India’s Jharkhand and Karnataka states.