Jindal Steel and Power Ltd (JSPL), part of the $15-billion O P Jindal Group, today said it wants to pull out of its $2.1-billion Bolivian venture blaming that nation’s government for failure to meet contractual commitments. This could bring the curtains down on the largest proposed investment by an Indian company in South America, also the largest by a foreign company on a single project in Bolivia, if JSPL’s concerns are not favourably addressed.
The flagship entity of industrialist and Parliamentarian Naveen Jindal had in 2007 won the rights of development for half of the 40-billion-tonne reserves in El Mutun, the world’s largest iron ore deposit at a single location, for a period of 40 years. The project had soon run into rough weather as the two sides fought over gas allocation to the venture, with the Bolivian government encashing $36 million bank guarantee for the project.
“We have served our intent to terminate the contract and the government of Bolivia has 30 days to resolve the issues failing which, JSPL can terminate the contract within seven days thereafter,” the company said in a statement.
“In case Bolivian government comes out clean and informs how much gas it can actually supply and agrees to reconfigure plant capacity and investment and amend the contract, JSPL can consider staying back and continue investing in Bolivia,” it added.
Apart from iron ore mining, JSPL was also to set up a 10 million tonne per annum (mtpa) pelletisation plant, a 6 mtpa sponge iron plant, a 1.7 mtpa steel plant and a 450-Mw power plant through its foreign subsidiary Jindal Bolivia Ltd, as part of the contract. The company has already made investment exceeding $90 million on the project, apart from making investment commitments of more than $600 million for purchase of technology and machinery and making advance payments to vendors.
The Bolivian government was to sign an agreement for supply of 10 million standard cubic metre per day (mscmd) of natural gas for the project within 180 days of signing of the contract. The gas agreement has not been signed so far. The government of Bolivian is now willing to commit supplying 2.5 mscmd of gas, at the back of shortage.
JSPL had also blamed the Bolivian government for not providing substantial land for the project, leading to delay in starting work. “The Bolivian government wants billions of dollars of investment in the country but they have encashed bank guarantee twice of $18 million each. This shows the government of Bolivia wants to kill the goose which lays the golden eggs,” JSPL said. The dispute over the Bolivian government’s move to encash bank guarantee is pending in the International Court of Justice.
The Bolivian government had also threatened to cancel the contract in 2010, alleging delays in development of the project. JSPL was expected to invest $300 million for the first five years and $200 million for the next three years in the venture.
Also read:Jindal Steel's $2.1-billion project gets Bolivian boot