It would seem the western world is not the only place where licensing and land acquisition hinder economic development. Contrary to what many supporters of trade barriers would have one believe, steel mills in some developing countries don’t all have land handed to them with licenses in place to build a steel or other kind of manufacturing plant. Quite the opposite in fact. Around 70 million tons of steel making capacity planned for production by 2012 in India is struggling to be realized as project after project is bogged down in planning issues and disputes with local land owners.
According to Bloomberg, India’s plans to raise steel production from the current approx 57m tons to 124m tons by 2012 are unlikely to be realized. In total, steelmakers aiming to set up 160m tons of capacity in the eastern states of Chhattisgarh, Jharkhand and Orissa have failed to win mining licenses from the state governments and acquire land from protesting farmers in recent years. These three states alone hold 70% of India’s coking coal and 55% of its iron ore according to this article.
South Korea’s Posco has announced plans to invest $12bn in a plant in Orissa. Arcelor is to invest $10bn in neighboring Jharkhand and Tata, India’s biggest domestic steel producer, plans to build two plants of $6bn each, one in Orissa and one in Chhattisgarh. Unfortunately the states where the iron ore and coal are situated are also the states with a history of opposition to development. The India business blog says 22 major steel projects in the country are being held up because of procedural delays in obtaining environmental impact assessment clearance and delays in land acquisition mainly due to public protests.
With gross domestic product growing at 6.1% in the first three quarters of this year and 7.9% in the last quarter, steel demand is rising fast. Steel Secretary Atul Chaturvedi is quoted as saying demand increased 7% in the first seven months but is expected to hit 10% by March of 2010. However, with current consumption running at about 57m tons it would be 2015 before consumption topped 100m tons never mind the 125m tons hoped for by the government. The reality consumption is unlikely to continue to grow at 10% but then neither are all these plants likely to be built, either way India will have a long way to go to match China’s approx 500m tons of capacity.