NEW DELHI/KABUL – (Reuters) – An Indian consortium has slashed a planned $10.8 billion iron ore investment in Afghanistan by 80 percent because it has been unable to get funding for the project.
The consortium has proposed new terms which would see just 130.57 billion rupees invested, according to figures released on Tuesday in India’s steel ministry year-end report.
Led by state-owned Steel Authority of India Ltd (SAIL) (SAIL.NS), the group was forced to renegotiate the terms of the deal with the Afghan government after India’s finance ministry refused to fund the project.
The original proposal called for investment in three iron ore blocks at Hajigak in Afghanistan and in a 6 million-tonne-per-year (MTPA) steel plant.
But the finance ministry told the consortium, according to an official involved, to draw up a fresh viability study. Under the new proposed terms, the size of the plant would fall to 1.2 MTPA.
Afghanistan’s Ministry of Mines said the final sum had not been agreed and it had not been notified by the consortium.
“They have not sent any official letter to us about changing the investment money from $10 billion to $2 billion,” a ministry spokesman said, adding that negotiations were under way.
“The negotiation is in progress and every day we see good results,” he said.
The Indian steel ministry confirmed that talks were under way.
SAIL, along with partners NMDC Ltd (NMDC.NS), Rashtriya Ispat Nigam Ltd, JSW Steel Ltd (JSTL.NS), Jindal Steel & Power Ltd (JNSP.NS) and Monnet Ispat & Energy Ltd (MNET.NS), won a bid in late 2011 to explore the three iron ore blocks with reserves of 1.28 billion tonnes of ore.
If a final deal is sealed, the consortium expects to produce 2.5 million tonnes of iron ore per year from the blocks in the Hajigak deposit.
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