In the biggest foreign investment pullout, world's largest steel maker ArcelorMittal on Wednesday scrapped its $12 billion (Rs 50,000 crore) steel plant in Odisha over inordinate delays, problems in acquiring land and securing iron ore linkages.
The developement comes just a day after South Korean steel major Posco pulled out of its Rs 30,000-crore steel mill in Karnataka and the government widened its doors to foreign direct investment for a dozen sectors.
Steel baron Lakshmi Mittal-headed ArcelorMittal's proposed plant in Odisha was among the biggest foreign direct investments India has attracted.
Two other plants - Rs 52,000 crore steel mill of Posco in Odisha and Rs 50,000 crore steel mill of ArcelorMittal in Jharkhand - are the two other largest FDI India has attracted.
Both the projects are also facing inordinate delays.
"ArcelorMittal has met today 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," it said while giving reasons for scrapping the project.
According to sources, ArcelorMittal had not made any progress in Odisha in last three years and only 8 gramsabha meetings out of 15 required for land acquisition in Odisha was conducted till first half of 2010. The status remained the same till date, they added.
For ArcelorMittal, progress in Karnataka 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.