MUMBAI: South Korean steel giant Posco scrapped yesterday a $5.3bn deal to build a steel plant in India due to delays, in a blow to New Delhi’s efforts to woo investors.
The company said it was dropping the project in the southern Karnataka state because of problems in obtaining mining rights and vociferous opposition from local residents. “This is an example that doing business in India is tough,” said Sonam Udasi, head of research with IDBI Capital.
Posco, the world’s fourth-largest steelmaker by output, signed an initial agreement in June 2010 for the project but has faced big protests from farmers.
Industrialisation has been long championed by economists as a way to pull tens of millions of Indians out of poverty.
But acquiring land for factories, roads, housing and other projects has created sometimes deadly battlegrounds with many farmers complaining they have been forced to sell at below market rate and robbed of their livelihoods. Posco’s India chairman Yong Won Yoon said the company was pulling the plug on the project — set to produce six million tonnes of steel per year — “given market conditions and significant delay in acquiring the required land”.
Posco’s announcement comes as it is contending with a sharp downturn in the steel market due to weak international economic conditions. Posco said it remains committed to a separate $12bn steel plant project in eastern Orissa state, touted as India’s biggest single foreign direct investment.afp
