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Russian steel giant Severstal decides to pull out of India
NAVTAN KUMAR  New Delhi | 7th Sep 2013

he Russian steelmaker Severstal has decided to pull out of its India project citing "unfavourable business environment". This is the third global company to quit India after ArcelorMittal and Posco, which left their Orissa and Karnataka projects, respectively, because of delays in acquiring land and mining licences.

In an email response to The Sunday Guardian, Severstal spokesperson Anastasia Mishanina said about their Karnataka project, "We have always believed that India has high economic potential. However, we decided to halt our project as we feel that the current business environment is still unfavourable to us. Despite India's potential, running a business there remains a challenge."

The Russian company signed a memorandum of understanding in 2010 with the National Mineral Development Corporation (NMDC) to establish a joint venture company for the purpose of executing a 2 million tonne per annum (MTPA) steel project, which was to be expanded to 5 MTPA. The MoU was signed by NMDC's then chairman cum managing director Rana Som, and Severstal CEO Alexy A. Mordashov, in the presence of Virbhadra Singh, who was Union Steel Minister at the time. The two companies had planned to invest Rs 9,000 crore in the project initially.

The NMDC was allocated 2,500 acres of land at Vijayanagar in Karnataka's Bellary district. The work on the steel plant was supposed to start by 2012 and production was to start by 2015. The joint venture company was to get its coal from Russia, and iron ore from India, the reason why Bellary, which is rich in iron ore, was selected. According to a source, the NMDC wanted a 50:50 share in the JV, but Severstal wanted a majority stake, which led to a dispute between the two. The Russian company was also upset with the slow progress in terms of clearances.

Earlier, NMDC's current chairman cum managing director, C.S. Verma had mentioned that they were not getting any responses from Severstal about the project.

Severstal is one of the top steel manufacturing companies in the world, with a total production capacity of 15 MTPA and has its presence in the United States, Italy, Ukraine, Latvia, Poland, Liberia, Brazil and Russia.

According to an Assocham study, a staggering 43% of total investment projects worth Rs 52 lakh crore across the country remained a non-starter as on March 2013. While 34% of these investments are stuck at the stage of announcement, the implementation of 6% of the projects has been stalled. There is no information on the remaining 3%, said the study, which was made public this week. As per the study, investments worth over Rs 69.5 lakh crore, which is about 57% of the total investments of Rs 122 lakh crore attracted from various public and private sources, are at the stage of implementation.

"These dismal figures showcase that owing to the prevalence of global recessionary trends and the slowdown of the Indian economy, investments across states have been kept on hold. This is a matter of worry for a country that desperately needs investments. The prevailing unstable external and internal economic conditions, high inflation, credit availability and its cost along with a host of local problems, like delays owing to land acquisition, have been affecting the investment scenario in India," Assocham secretary general D.S. Rawat told this newspaper.

 
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