Delay causes 50% cost overruns in India projects: Mittal

New Delhi: Arcelor Mittal, the largest steel manufacturer in the world, is anticipating a major cost overrun to the tune of around 50 per cent in its investments in Orissa and Jharkhand due to delays caused in land acquisition and mining leases.

The Group Chairman, Mr L.N. Mittal, said that “during the last two years, costs have increased between 30 per cent and 50 per cent.”

Mr Mittal, however, could not ascertain to what extent costs would go up finally.

“It would all depend on the delays,” he said while adding that he is optimistic to start work next year.

“It will take around 36 months to commence production after ground breaking,” Mr Mittal said.

“In the present circumstances, we hope to begin construction work in the first half of next year and when that happens, we would be able to commence production of the first phase in the second half of 2012. Work in both the projects is moving simultaneously and we have put in place a very strong 20-member team to work on them,” he said.

The company would be setting up greenfield steel plants for the first time in its history. Two integrated steel plants with an annual capacity of 12 million tonnes each are planned in Orissa and Jharkhand.

The MoU for setting up the Jharkhand plant was signed in October 2005 and for Orissa in December 2006. The cost escalation since then is to the tune of almost 50 per cent.

Detailed project report (DPR) for the Orissa plant has already been submitted to the State Government and the DPR for the Jharkhand plant is expected to be completed early next year.

Pointing out that delay in land acquisition and mining leases are the key obstacles; he said that gram panchayat level hearings on the land issue will start soon. “It is a learning process. Our teams in the States are trying to educate the local villagers and each day we are learning something new,” Mr Mittal said.