South Korean steelmaker Posco said it will delay the start of construction of its $12 billion (Rs52,800 crore) plant in India, the country’s largest overseas investment, until it is allocated enough land. Work had been scheduled to begin in April.
The world’s third-largest steelmaker estimated it needed 4,000 acres in Orissa, and won’t begin building until it has 3,000 acres, Jeong Tae Hyun, deputy managing director, said.
The land, mostly owned by the state government, has yet to be cleared of people. Posco has leased 1,135 acres. “We do not want to plan a schedule till we get the land,” said Jeong over the phone from Bhubaneswar on 9 February. “We hope the government finds a solution soon to this problem.”
Such delays may undermine India’s efforts to win more overseas investment even as the economy expands at a record pace of 9.2 %.
“There are a growing number of instances in which land has become the bottleneck in the development of a project,” said Subir Gokarn, chief economist at Crisil Ltd, the Indian unit of Standard & Poor’s.
Lee Ku Taek, CEO of Pohang-based Posco, joins global rivals such as Arcelor Mittal in seeking to build plants in growing economies in Asia, where demand for buildings and automobiles is soaring. India has the world’s fifth-largest reserves of iron ore, the main ingredient used to make steel. Arcelor Mittal, the world’s biggest steelmaker, has also agreed to build a $9 billion plant in Orissa.
Prices of the commodity have risen to a record for five years. India’s steel usage is forecast to rise 7.7% a year from 2010 to 2015, faster than the 4.2% global rate in the same period, according to the International Iron & Steel Institute.
The Orissa government formed an 11-member committee chaired by the chief minister to try and ensure that Posco’s planned investment proceeds without glitches.