It’s been a double-whammy week for India’s steel industry.
Earlier this week, South Korean steel giant POSCO, a company backed by billionaire Warren Buffet, announced it was pulling out of a $5.3 billion steel mill development in the country’s southern state of Karnataka.
Readers may recall that POSCO has been trying to get another $12 billion steel project off the ground in the state of Odisha for the last decade or so, but has been unable to because of the bureaucratic and legal hurdles that keep cropping up. In fact, to hedge its bets against the slow-moving Odisha project, the steel major had decided to set up three more plants in the country, one of which was the Karnataka plant.
Three days after POSCO’s decision to pull out, the largest integrated steel and mining company in the world, ArcelorMittal, also announced it was dumping plans to put up a steel project in Odisha worth US $12 billion.
What’s the deal?
In fact, ArcelorMittal, like POSCO, had about a year ago announced it was canceling its own steel project in Karnataka since India was “no more a priority for the company where investments were concerned.”
There was only one saving grace for the Indian government this time.
POSCO, incidentally judged the world’s most competitive steelmaker for the fourth time in a row earlier this month, announced it might proceed with another US$12 billion project billed as “India’s largest foreign direct investment (FDI).”
The question that now begs for an answer is – where is the “India growth” story going wrong, especially on the steel front?
In both cases, in addition to the project’s individual problems, the commonality is India’s complicated bureaucratic and regulatory demands, not to mention its haphazard policy of late on iron ore, resulting in its short supply.