South Korea's Posco said on Tuesday that it has
decided to pull out of a $5.3 billion (Rs 31,466 crore) steel mill project in Karnataka due to delays in
securing land and opposition from residents.
The move highlights the challenges facing Posco as it tries to gain a foothold in India and tap into the country's iron ore reserves and customer base.
Posco's exit comes even as Prime Minister Manmohan Singh is scheduled to discuss the proposal to increase foreign direct investment (FDI) caps in sectors such as telecom, retail and defence with his Cabinet colleagues on Tuesday.
Posco has been trying to expand overseas to offset competition from smaller rival Hyundai Steel Co backed by automaker Hyundai Motor Co.
Backed by billionaire investor Warren Buffett, Posco is grappling with a prolonged steel market slump caused by the weak global economy, especially in China. It posted only a small profit recovery from January to March.
Posco's Odisha project in May overcame one of the last legal hurdles to the granting of a mining licence, raising the South Korean firm's chances of getting preferential access to iron ore.
The South Korean steelmaker had waited eight years to get the necessary clearances, land and mining licence to start work on the project, billed as India's largest foreign direct investment.
<em>Photo: Reuters</em> 
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