ArcelorMittal abandons plans to build new plant in India

ArcelorMittal, the world’s largest steel producer, has scrapped its project for a plant in Orissa state, eastern India, mainly because its attempts to acquire the necessary land have been continually obstructed.

The company, which makes about 6% of the world’s steel, had signed an agreement in December 2006 to build a $12bn (£7.8bn, €9.1bn) complex. Annual steel production from the site was due to reach about 12 million tonnes.

However, farmers whose land would have been taken voiced strong objections and complained they were being expected to sell at below the market rate.

ArcelorMittal’s offers to purchase hit legal blocks, and repeated approaches to R.K. Singh, the steel and mines minister, received no response. Another obstacle was the company’s failure to obtain a licence to mine iron ore at the site for use in its steel production.

ArcelorMittal’s pull-out troubled some senior figures. The Orissa Congress president Niranjan Patnaik protested: “The government stands exposed by the withdrawal of the ArcelorMittal steel project. Its tall claim of pushing industrialisation in the state over the last 12 years has fallen flat as none of the major projects have taken off yet.”

Former industries minister K.V. Singhdeo accused the government of a lack of vision and blamed its refusal to welcome big projects for driving investors away from Orissa.

The ArcelorMittal decision came a day after the Korean manufacturer Posco dropped plans for a $5.3bn (£3.5bn, €4bn) steel plant in Karnataka state, southern India, because it too failed to acquire the land and to obtain permission for iron ore mining.

Despite its disappointment, ArcelorMittal is continuing with two other factory projects in Karnataka and Jharkand state, located in eastern India.

The stubbornness of the Orissa farmers whose land was eyed by ArcelorMittal did not surprise Nitya Rao, professor of gender and management at the University of East Anglia international development school.

Rao recalls that Orissa has a recent history of rights activism, making its citizens more aware of injustice.

Large companies wishing to start up in India have always tried to obtain land on the cheap, she told Ethical Performance.

She wondered why corporations were prepared to spend heavily on building factories and to make deals with the government but would not offer, say, an extra $2m to the people whose land they took.

“They feel they can browbeat the poor,” she said. “These people have always had a bad deal.”

Another problem for farmers being displaced by industrial development was that many did not own their land and had no rights over it. 

Professor Rao called for a clearer law on land rights in India.