ArcelorMittal Announces Plans to Set Up Steel Plant in Karnataka

The world's largest steelmaker, ArcelorMittal (Luxembourg), is exploring the possibility of setting up a 6 million-ton-per-year integrated steel plant in the southern Indian state of Karnataka.

According to research by Industrial Info Resources (Sugar Land, TX), the project investment is estimated to be in the range of $5.16 billion to $6.45 billion. Company officials have indicated that project approvals are awaited from the state government's single-window clearance committee. A captive power plant is also part of the project, which will be in addition to the company's proposed 12 million-ton-per-year steel projects in Jharkhand and Orissa.

Sources have indicated that the decision on the project will be based on several technical and economic factors. Feasibility studies are under way and are expected to be completed in the next 3 to 4 months. Details related to final investment, plant capacity, and build-time schedules will be communicated after the reports are reviewed.

The Karnataka government was expected to hold talks with representatives of ArcelorMittal on November 27. Government officials have stated that ArcelorMittal has only made a formal request to set up a steel plant in the state. Hence, no decision has been taken on the kind of incentives that will be provided for the project. Karnataka has proven iron ore reserves of about 3.5 billion tons, mainly in the areas around Koppal, Raichur and Bellary. It is likely that, if approvals are received and the feasibility studies are promising, ArcelorMittal will set up the steel plant in this region.

ArcelorMittal's decision to build a new steel plant in Karnataka comes at a time when the proposed projects in Orissa and Jharkhand are facing numerous delays. The company has allocated $21.5 billion toward the steel projects. ArcelorMittal signed memoranda of understanding with the state governments of Jharkhand and Orissa in 2005 and 2006, respectively. However, land acquisition problems have delayed these projects. The steel plant complex in Orissa is estimated to require 9,000, acres while the Jharkhand plant will need 11,000 acres. ArcelorMittal has faced stiff opposition from farmers and social activist groups regarding allotment of land. The company also faced issues relating to mines allocation. Recently, ArcelorMittal announced that delays in acquiring land in these states had forced the company to explore alternate sites in the country. Karnataka emerged as one of ArcelorMittal's top choices.

Jharkhand and Orissa are part of the mineral-rich eastern region of India. The state of Jharkhand is endowed with minerals that include bauxite, iron ore, uranium, lime, coal and copper. Estimates suggest that the mineral resources of the state account for 40% of India's total mineral reserves. Orissa is estimated to contain 5.4 billion tons of hematite, an iron ore that is preferred by steel manufacturers. The state also has rich reserves of graphite, coal, granite and bauxite, which account for 17% of India's natural mineral deposits.

Both states are preferred destinations for Indian and global steelmakers to set up steel and power plants. However, there are growing concerns among investors regarding land acquisition problems and project delays. POSCO (Pohang, South Korea), which announced plans to set up an integrated steel plant near Paradip in Orissa, is also facing delays because of land acquisition issues.

In 2005, POSCO signed an agreement with the Orissa government to set up the steel plant. The $12 billion project requires about 6,000 acres of land, of which only 500 acres has been acquired so far. In a recent move, steel minister Virbhadra Singh announced that the ministry would hold talks with the governments of Jharkhand and Orissa to resolve issues, attract investments and ensure timely completion of projects.