Raipur, Oct. 7: Diamond has cast a shadow on the steel prospects of the Tatas in Chhattisgarh.

After an exercise that lasted four months, Tata Steel selected seven villages in Bastar for its mega plant. But now, the government does not want to hand over the land on the grounds that there could be diamond deposits in the region.

Tata Steel had inked a memorandum of understanding (MoU) with the government on June 4 to invest over Rs 10,000 crore in the state. It also selected seven villages ? Salepal, Kurenga, Baganpaan, Barupata, Ransargipal, Bhejipadar, and Avanwal under Tokapal development block, about 18 km from Jagdalpur, for the steel plant.

The government has based its contention on the findings of a study conducted by the Geological Survey of India about a decade ago.

The survey had revealed the presence of Kimberlite pipes, the source of diamond, in Tokapal, one of the villages chosen by Tata Steel.

Speaking to The Telegraph, principal secretary (mining) Shivraj Singh said: “The government has asked the company to select some other place for the project.”

He added that the company had earlier submitted a rough proposal for the site.

Tata Steel has asked for about 5,000 acres of land, Singh said, adding that a decision will be taken after the matter is discussed with officials of the company. Singh said a few rounds of discussions already have been completed and the project site will be finalised within a week.

Sources in the Jagdalpur district administration said Tata Steel has expressed concern over the development. “The villages selected by the company do not have too many people living there. Hence, rehabilitation would not have been a big problem while acquiring the land,” an official said.

On the other hand, the site suggested by the government ? in which a few villages proposed by the company have also been included ? are thickly populated. Besides, the company will have to go through the time-consuming process of site selection all over again.