July 17, 2013 / 2:31 PM / 4 years ago

UPDATE 2-ArcelorMittal abandons dormant Indian project

* Says will not pursue 12 mln tonne/yr plant in Odisha

* To stick to 12 mln tonne Jharkhand plant, 6 mln tonnes Karnataka plant

* Govt official says Odisha project was dormant for two years

By Krishna N Das

NEW DELHI, July 17 (Reuters) - ArcelorMittal, the world’s top steelmaker, said it would scrap a planned steel plant in India due to delays in acquiring land and an iron ore mine, obstacles that have also caused South Korea’s POSCO to abandon plans.

The decision to scrap the planned 12 million-tonnes-a-year (MTA) plant in the eastern state of Odisha, comes a day after the world’s fifth biggest steelmaker, POSCO, said it was ditching a 6 MTA plant in the southern Karnataka state because of delays in receiving iron ore mining rights and opposition from residents which had held back land acquisition.

The failed projects will be a blow to India’s federal government, which on Tuesday relaxed foreign investment rules to draw in funds needed to turn around slowing economic growth and support a weak rupee.

ArcelorMittal India and China Chief Executive Vijay Bhatnagar said the company’s other two projects in mineral-rich states of Jharkhand and Karnataka were making “steady progress” and it would continue to pursue them.

The Jharkhand plant is expected to have an annual capacity of 12 million tonnes, while the one in Karnataka is expected to have capacity of 6 million tonnes.

“The delays relating to land acquisition and allocation of captive iron ore blocks means (the Odisha) project is no longer viable,” Bhatnagar said.

POSCO said on Tuesday that it would focus on its main steel project for a 12 MTA plant in Odisha.

An Odisha government official said ArcelorMittal had not deposited the required 10 percent value of the 8,000 acres of land it wanted.

“Despite repeated reminders from the state authorities, the company did not deposit the required charges,” said Vishal Kumar Dev, chairman of the Industrial Infrastructure Development Corp of Odisha, the agency that facilitates industrial investment.

“The project was dormant for the past two years,” he added.

ArcelorMittal spokesman Ritesh Sinha declined to comment on the deposit but Bhatnagar said in a statement the company had invested “considerable resources into the project” over the past seven years.

Industry executives have estimated it costs about $1 billion to set up a plant in India of 1 million tonnes.

“I don’t think many people had factored in them continuing with the (Odisha) project,” said Neil Sampat, analyst at Nomura in London.

Although ArcelorMittal is pulling out of Odisha, its rival POSCO is expected to get an iron ore exploration licence for its planned $12 billion plant in the state, two government officials told Reuters last week.

Odisha lies in the heart of India’s mining belt and holds a third of the country’s iron ore reserves, a quarter of its coal, half its bauxite and more than 90 percent of its nickel and chromite.

Since January 2008, the state has attracted investment proposals worth $210 billion. Jindal Steel & Power Ltd , Tata Steel Ltd and Vedanta Resources Plc are some of the top companies with operations there.

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