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Sunday ET: Jindal Steel alleges govt reprisal in Bolivia after exiting project

Just days after JSPL walked out of a Bolivian project citing breach of contract by the country's government, the firm's employees have had criminal cases slapped against them and their properties confiscated.

, ET Bureau|
Last Updated: Jul 22, 2012, 02.19 AM IST|Original: Jul 22, 2012, 02.00 AM IST
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Naveen Jindal
Naveen Jindal
MUMBAI: Indian companies keen on setting up mining projects in developing countries will now have to rethink. Jindal Steel & Power, the Naveen Jindal-controlled steel and utility company that surprised the corporate world in 2007 by proposing to invest $2.1 billion in a mine-cum-steel project in Bolivia, is now facing problems concerning its employees and assets.

Just days after the Delhi-based company walked out of the project citing breach of contract by the Bolivian government, employees of Jindal Steel & Power (Bolivia) have had criminal cases slapped against them and their properties confiscated. According to a Jindal Steel spokesperson, two of their employees were arrested on July 20 in Porto Suarez, the site of Jindal’s project, and plant and equipment seized.

While the Bolivian government could not be reached, people in the know say officials of the Latin American country are upset that the El Mutun project, which was described as that country’s largest foreign direct investment, has been terminated. Jindal Steel and Power said it has written to Union external affairs minister SM Krishna.

The development is similar to the delays that Essar Group — another Indian conglomerate with ambitions to expand manufacturing units overseas — has been facing. Having bought a steel plant and a mine in Zimbabwe for $750 million last year, Essar is now subjected to delayed approvals from the government that is pushing back the project schedule and inflating costs.

Indian companies have been scouting the world for coal and iron ore mines to feed expanding capacities back home. While most of the searches have been in mining-oriented countries like Australia, Indonesia and South Africa, rising valuations have forced them to venture into developing countries in Africa and Latin America where laws for mining are still not ready.

A consortium of Indian steel firms, led by state-owned SAIL, recently won the contract to build a steel and a power plant in Afghanistan at a total cost of $14 billion.

Jindal Steel Bolivia called off the contract on July 16 due to non-fulfilment of conditions relating to supply of gas. The contract said the government was to sign an agreement for supply of natural gas required for the project — 10 million cubic meter per day, within 180 days of the signing of the contract.

While the agreement has not been signed to date, Bolivia subsequently agreed to supply only 2.5 MCD of gas from 2014 onwards. The government, however asked Jindal Steel to put in the entire proposed investment of $2.1 billion, as per capacities originally agreed under the contract.

“The project size was based on the supply of a specified quantity of gas. If the gas allocation is less than one-fourth, how can the project size remain the same?” asked one Jindal official.

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