Land buy delays prompt steel-maker to search for other sites
After a long wait of four years for land in Jharkhand and Orissa, the world’s largest steel-maker ArcelorMittal has decided to begin a search for alternate sites for its $20 billion (about Rs 95,000 crore) green-field steel projects in India.
In a statement from London today, Mittal said, “…in the event that land acquisition continues to prove difficult, we will start to search for alternate sites.” However, the steelmaker continues to work on its two projects in Jharkhand and Orissa, he added.
“ArcelorMittal has no plans to quit India. India is an important country for steel demand growth and is an important part of ArcelorMittal's long-term strategic plans,” Mittal said in the statement after London-based Financial Times (FT) reported that he was close to pulling out of two projects in India.
India-born steel tycoon had announced both steel projects with annual capacities of 12 million tonnes each at a time when the global economy was sound and demand for steel was growing. On October 8, 2005, before he acquired Arcelor, the world's second-largest steelmaker, his company Mittal Steel had signed a Memorandum of Understanding (MoU) with the Jharkhand government for mine development and for building a steel-making complex.
Three months later, the conglomerate signed another MoU with Orissa to set up a plant in Keonjhar district. The London-based company was planning to start construction on both projects by the end of this year, with a commissioning deadline of 2014-15.
ArcelorMittal sources in India said the projects would be moved out of Jharkhand and Orissa to other states if land acquisition is delayed further.
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Delays in persuading farmers and others to sell the land he needs for the developments in the states of Jharkhand and Orissa are “unacceptable”, Mittal told FT. “If we cannot make progress in these two sites we will have to abandon the idea of starting the projects there and look for other places in India for our expansion,” Mittal added.
However, industry experts said it would not be easy to find such locations with iron ore resources in the country and get clearances rapidly. “The statement also means that ArcelorMittal would divert its investments to other countries,” said a Mumbai-based analyst.
Mittal also told FT that he was still committed to building at least one steel plant in India.
Last month, Mittal, who has very little presence in his motherland, announced his interest in becoming co-promoter in the Indian cold-rolled and galvanised products maker Uttam Galva. ArcelorMittal, which last month struck a deal to acquire 35 per cent in Uttam Galva, said its open offer would begin on October 31 and close on November 19, 2009.
The Jharkhand government on Monday said it had not received any communication from the steel-maker in this regard. “We have no information that ArcelorMittal is planning to wind up its greenfield steel project in the state,” said Jharkhand Industries Secretary NN Sinha.
ArcelorMittal has selected 11,000 acres for the steel plant in Jharkhand but faced strong resistance from local residents who formed an anti-displacement organisation, Jharkhand Visthapit Virodhi Sangh (JVVD) to spearhead the protest against land acquisition.
Meanwhile in Orissa, a senior government official said ArcelorMittal shouldn't be unduly worried about problems in acquiring land in the state. “I am a little surprised by the comments. They should stay in touch with the government to monitor the progress of the land acquisition,” said A M R Dalwai, secretary, department of steel and mines in Orissa.
The project requires about 8,000 acres in Keonjhar, where tribals with the support of activists were opposing the project. ArcelorMittal said if it decided to abandon plans for the two sites, for which preparatory work has been under way for two years, the financial effect would be “negligible” since no land had so far been acquired and no building work done, FT reported.
Credit Suisse in its report last year said that land acquisition delays would escalate ArcelorMittal’s capital cost for the projects by 50 per cent. Similarly, Tata Steel’s three greenfield projects worth Rs 68,000 crore, South Korean steel-maker Posco’s Rs 55,000 crore Orissa project are also facing land acquisition issues, resultantly cost escalation, said Credit Suisse.