LN Mittal with chief minister Naveen Patnaik during signing of the MoU in Bhubaneswar in July 2006

Bhubaneswar, July 18: The withdrawal of ArcelorMittal from its 12-million-tonne steel project in Keonjhar district has dealt a blow to the state government’s much-touted industrialisation drive that may also have political repercussions for chief minister Naveen Patnaik.

Along with Posco’s Rs 52,000-crore project near Paradip in Jagatsinghpur district, ArcelorMittal’s proposed steel plant at Patna in Keonjhar had given an international profile to Odisha’s industrialisation and the Naveen Patnaik government had been cashing in on it during elections.

The steel giant’s withdrawal has suddenly jeopardised the industry-friendly image of the state while providing fresh ammunition to the Opposition against the chief minister, who may find it hard to seek votes on the development plank in the next elections.

“It is now more than obvious that this government has been signing MoUs only for money and to hoodwink the people of the state. They have no sincerity of purpose,” said former minister and veteran Congress leader Niranjan Patnaik. He found it ironical that a mineral-rich district like Keonjhar has practically no industry and ArcelorMittal, which was the only hope of the people, has decided to leave.

Senior BJP leader Bijay Mohapatra, mirrored the same sentiments. “The withdrawal of ArcelorMittal has exposed the true face of industrialisation in Odisha. Notwithstanding the big claims made by the government, it has failed to provide a conducive atmosphere for the growth of industries. How else can one explain the inordinately long time being taken in acquiring land for big projects?” he said.

Steel and mines minister Rajani Kant Singh, though, tried to downplay the withdrawal saying it would not have any major impact on the industry. “Had we not been getting any investments, it might have made an impact but that is not the case,” he said and blamed ArcelorMittal for not doing enough to take its Odisha project forward. “When the MoU was signed in 2006, both sides had certain responsibilities but they did not do much on their part in the next five years,” he said.

Official sources made it clear that the government would not approach ArcelorMittal to reconsider its decision.

The industry, however, was more cautious in its reaction. Utkal Chamber of Commerce and Industries (UCCI) president Ramesh Mohapatra said though the withdrawal of a big company like ArcelorMittal was likely to dent the state government’s image, it was not entirely the latter’s fault. “Had the government tried to acquire land for the project in a more aggressive manner, a Posco like situation would have emerged,” said Mohapatra.

ArcelorMittal had signed an MoU with the state government on December 21, 2006, to set up a 12-million-tonne per annum steel plant at Patna in Keonjhar with an investment of Rs 40,000 crore. According to the agreement, the project required around 7,753 acres. But there was no progress in land acquisition and the company had not even submitted the detailed project report.

Of the required land, 4,905 acres were under private possession and acquisition had become difficult due to local resistance. The government was not able to hold gram sabhas in the 15 villages of the project area.

However, there is no denying the fact that quite a few big ticket projects in the state are wobbling because of land or raw material-related problems. While land acquisition for the first phase of Posco’s proposed steel plant has been completed, the project still faces a number of hurdles, the most formidable of them being the allotment of iron ore mines with Centre yet to take a call on the issue.

In the steel sector, the state government has signed 49 MoUs till date but only 29 of these units have gone into partial production. The aluminium industry scenario also does not appear to be bright with Vedanta’s one-million-tonne alumina refinery at Lanjigarh in Kalahandi district facing a serious raw material crisis with the fate of Niyamgiri bauxite mining project, its biggest hope, yet to be decided.

On the power front, of the 29 MoUs the state government has signed with private companies since 2004, only one project has been commissioned so far while seven others are in different stages of construction. The remaining 21 have failed to take off because of a variety of reasons including problems of land acquisition and delay in forest and environment clearance.