The future of Jindal Steel and Power's $2.1-billion Bolivian iron ore and steel project is again uncertain.
An official in the know said, “JSPL is tight-lipped about the project. It has told investors it would update them in a month or two on whether the project will go ahead or not.” An email to the company went unanswered.
In 2007, Naveen Jindal’s JSPL signed a deal with the Bolivian government to mine half the 40-billion tonne reserve in the El Mutun mine. This is one of the largest of iron ore mines in the world and JSPL became the first Indian company to lay its hands on such a huge reserve. This is the largest proposed investment by an Indian company in South America, also the largest by a foreign company on a single project in Bolivia.
However, of the promised $2.1 bn, till date JSPL has invested only $70 million. A major chunk has gone into starting the operations. In July 2011, JSPL announced it had begun iron ore shipments from El Mutun. Prior to that, in May, JSPL said that it had contracted Midrex to set up a 2.52 million tonne per annum (mtpa) natural gas-based Direct Reduction plant at El Mutun.
By the agreement of 2007, JSPL was supposed to invest $2.1 bn to develop 20 bn tonnes of ore reserve, set up a 1.7-mtpa steel plant, a 6 mtpa sponge iron plant, a 10 mtpa iron ore pellet plant and a 450 Mw power plant.
The Bolivian government is expected to audit the investments made by the company. This audit is scheduled in May and clarity on the project’s future is expected after this.
An investor, on condition of anonymity, said, "Things have changed in the last year and I don't think JSPL wants to make the investment in the schedule as listed in the agreement." The company is in dialogue with Bolivian government to find an amicable resolution, he said.
However, any leeway from the original agreement looks difficult. This is not the first time JSPL is looking for alteration in the agreed plan. The first cracks in the deal appeared in the end of calendar 2009, when the Bolivian government threatened to cancel the contract with JSPL if the company did not begin investing as specified in the schedule. The two resolved their differences when JSPL agreed to honour the agreement. In October 2011, the Bolivian government again pulled up the company for dragging on the investment schedule and threatened to cancel the agreement.
