Steel Minister of India Blames Mittal, Not India, For Delays
Resource from: Wall Street Journal (India) Likes:2974
Jul 03,2012
India's steel minister is fuming. His national pride has been hurt after billionaire Lakshmi Mittal, chairman of ArcelorMittal, the world's largest steelmaker, complained earlier this year about delays in constructing two proposed plants in India.
"He should stop maligning India and the Indian government. Why is he not beginning work on his projects," Beni Prasad Verma, the minister, told a local news agency.
Why not indeed? Maybe Mr. Mittal just likes not building steel plants in a country where demand is expected to grow at 8%-9% a year for the next decade, while growth in Europe and the U.S. is less robust.
Or perhaps India's government should take a good look at itself.
Mr. Mittal signed pacts with state governments six years ago to build the two steel plants. But efforts to acquire the land for the projects is still ongoing, highlighting one of the main obstacles to investment in manufacturing facilities in India.
In comparison to Mr. Verma, who is known for his verbal indiscretions, Mr. Mittal's comments earlier this year while on a trip to India were measured.
"I feel bad; I feel a bit concerned about delays in the steel projects," Mr. Mittal said. He added that, "There's no way I can ignore India, and I am not giving up on these projects."
Mr. Verma imperiously chided Mr. Mittal for not contacting him to sort out hurdles to the projects, even though a steel minister, like the Indian president, has very little actual powers.
Mr. Verma's oversees two large state-owned steel and iron ore mining companies, Steel Authority of India Ltd and NMDC Ltd. Mr. Verma occasionally summons officials from the two companies to his office over operational matters. Beyond these companies, he has little say over India's steel sector.
Other private-sector steelmakers would have found Mr. Verma's comments equally bizarre.
Steel companies have been unable to start a single major project in the last five years. Tata Steel will be the first big steel maker to complete a new plant, when it finishes construction of its Kalinganagar project in the eastern state of Orissa, expected within a year.
"The way things are going now, India may have to import $40 billion-$50 billion worth of steel a year from 2020, making it the third biggest imported item after crude and gold," Jindal Steel & Power Ltd's deputy managing director V.R. Sharma said at an industry conference in May.
Let's return to Mr. Mittal, who was born in India but now lives in London. He had signed initial pacts with the state governments of Orissa and Jharkhand to build a 12-million-tons-a-year plant in each state.
But protests from landowners, mostly local tribal populations, have stalled these projects. The company has shifted its project site in Jharkhand state and has started seeing slow progress in land acquisition, though the company is still far off from starting either project.
In Karnataka state, where Arcelor Mittal signed a third pact to start another plant three years back, the company also has been unable to complete land acquisition.
Acquiring land remains a fraught process, almost completely controlled by state governments, with no involvement of federal authorities. Local landowners have increasingly become opposed to displacement, scuttling several industrial projects in India.
But that's not the only hurdle. Getting a federal clearance from the environment ministry is a long exercise which can take years. Even then, environmentalists can challenge such clearances, causing further delays, as another steelmaker, South Korea's Posco, is finding out.
(Wall Street Journal (India))
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