Huge India steel deal announced

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The world's largest steel producer, Arcelor Mittal, has signed an agreement in principle with the Indian state of Orissa to set up a huge steel plant.

The deal, or Memorandum of Understanding (MoU) for the 12 million tonne plant will involve an investment of nearly $9bn.

It was signed on Thursday by representatives of the two sides.

The plant will be located on an 8,000 hectare site northwest of the state capital, Bhubaneshwar.

"We have always said that we want to have an operational presence in India. The Indian economy is demonstrating excellent growth and steel consumption is set to increase considerably in the future," Arcelor Mittal's President, Lakshmi N Mittal said.

<a href="/1/hi/business/5142202.stm" class="">Profile: Lakshmi Mittal </a>

"Orissa is well known for its rich mineral reserves and as such is an ideal location for such a greenfield venture.

"Mr Naveen Patnaik, its chief minister, has done an excellent job in attracting foreign investment to the region and it is showing signs of becoming one of the major steel industry hubs of the future."

'Proud'

The company says that the project's first phase will be completed in 48 months while the final stage would require an additional 54 months.

Correspondents say that the plant is the first Indian operation of the European firm.

"The project will offer 5,500 direct and 15,000 indirect employments," the government said in a statement after the signing of the MoU in Bhubaneshwar.

Chief Minister Patnaik said that Orissa was "proud" to have two of India's largest foreign direct investments - a South Korean company, Posco, is currently working on another multi-million dollar steel project.

The chief minister said that he hoped that the projects would provide a "tremendous fillip" to the industrialisation process of Orissa.

The BBC's Sandeep Sahu in Bhubaneswar says that the announcement had come as a shot in the arm for the government, which has been concerned over the "tardy progress" of work on the Posco project.

Our correspondent says that the Posco plant has been strongly resisted by local people, who have been displaced by its construction.

Orissa has so far signed MoUs with 42 companies to set up steel plants in the state, with a total investment of around $33bn.

The state has nearly 27% of India's iron ore reserves.