South Korea's Posco has decided to withdraw from its $5.3 billion (Rs.31,466 crore) steel mill project in Karnataka due to delays in getting land and local residents' protests. It marks a big setback for India's FDI programme at a time when the government is already fighting a tough economic battle on several fronts.The move underlines the challenges Posco faces as it tries to gain a foothold in India and harness the country's iron ore reserves and customer base.
The exit comes even as PM Manmohan Singh is scheduled to discuss a Cabinet proposal to hike the foreign direct investment (FDI) limits in sectors such as telecom, retail and defence.
Posco has been trying to expand overseas to offset competition from Hyundai Steel Co backed by automaker Hyundai Motors. Posco is grappling with a prolonged steel market slump caused by the weak global economy, especially in China. Its Odisha project had recently crossed one of the last legal hurdles to a mining licence, improving its chances of preferential access to iron ore. It had waited 8 years for the clearances, land and mining licence to start work on India's largest foreign direct investment.