India is trying to attract foreign investors to revive its weakening economy by opening doors for foreign investments in more sectors like telecom, defense and insurance. But the scrapping of two mega steel projects, POSCO and Arcelor Mittal, shows policy paralysis and failed promises by Indian government.
South Korean giant Posco said on July 16th that, it was pulling out of a US$5.3 billion (Rs 30,000 Crore) deal to build a steel plant in Karnataka, looking problems in obtaining mining rights and opposition from local residents followed by a day when Arcelor Mittal pulled out from Odisha citing similar reasons.
In 2006 when government had signed an MoU with world’s largest steel producer Arcelor Mittal for setting up a 12MnT steel project in the state of Odisha with an investment of Rs 50,000 crore, highest ever foreign direct investment. It looked as India is the most preferred destination for foreign investors. As time passed, not even half the projects which had been proposed have started their work.
To some experts, this pull out has come as a ‘blessing in disguise’ for Indian steel industry, which is undergoing a rough patch. Experts feel that in FY 2012-2013 steel demand and growth has been just above 3% and chances of any substantial increase is unforeseen.
Even if some portion of proposed projects has been executed, there would have been an oversupply situation in Indian market. Experts believe pulling out of steel projects is not only because of delay in land acquisition and iron ore access but also looking at slow growth rate for steel in India in coming years.