Bolivian Govt Threatens To Takeover Half Of Jindal Steel's El Mutun Ir

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NEW DELHI: [url="http://economictimes.indiatimes.com/search.cms?query=Jindal%20Steel%20Bolivia"]Jindal Steel Bolivia[/url] (JSB), the Bolivian unit of Jindal Steel and Power, finds itself in choppy waters with the President of the Central American country threatening government takeover of Jindal's half of the prized [url="http://economictimes.indiatimes.com/search.cms?query=El%20Mutun"]El Mutun[/url] iron ore reserves.

News reports quoted Evo Morales, Bolivia's left-wing President as saying: "We hope that this contract can be accelerated and, if not, the state will begin to exploit and export the iron in Puerto Suarez." Earlier, Bolivia's energy minister had criticised the Indian company.

[url="http://economictimes.indiatimes.com/search.cms?query=JSB"]JSB[/url] has had a volatile relationship with the [url="http://economictimes.indiatimes.com/search.cms?query=Bolivian%20government"]Bolivian government[/url] ever since it won mining rights to half of the 40 mt El Mutun reserves, considered amongst the largest in the would, in 2007. The contract is vaid for 40 years.

JSPL Vice-Chairman and Head of Global Ventures, Vikrant Gujral insisted that its share of the iron ore - around 20 billion tonnes - is secure. Gujral said JBL has been assured gas supply for its proposed steel and power plants. "The same energy minister Jose Luis Gutierrez in fact promised to make gas available to the project," said Mr Gujral, adding that the minister was misquoted.

JBL wants 4 million cubic meters per day of gas by 2014 for its steel and power plants. State-owned gas firm[url="http://economictimes.indiatimes.com/search.cms?query=Yacimientos%20PetrolAferos%20Fiscales%20Bolivianos"]Yacimientos PetrolAferos Fiscales Bolivianos[/url] ( [url="http://economictimes.indiatimes.com/search.cms?query=YPFB"]YPFB[/url]) is yet to make a firm commitment.

In exchange for iron ore and subsidised gas from the government, Jindal has committed to invest $2.1 billion over the next eight years to build steel, sponge iron and pellet plants and a 450 mw power unit near Puerto Suarez in Santa Cruz. Another Jindal subsidiary, Gas to Liquids International, has also signed an agreement for four blocks of gas which has to be sanctioned by the Parliament.

However, members of the Bolivian government have repeatedly threatened to annul the agreement because of alleged delays and had encashed a $18 milion bond. JBL officials said the Bolivian government is responsible for some of the delays.

The latest differences stems from the company's decision to stop shipment of iron ore until next year, since water levels in the Tamango canal had fallen with the onset of winter. In land-locked Bolivia, the ore has to be shipped down the Paraguay-ParanAi river on barges.

"We have a 10,000-tonne order from Paraguay and have already shipped 6,000 tonnes. There is a lull now, movement will be restricted but we can, maybe, consider half loads till water levels rise again in January," said Mr Gujral.

Speaking at a naval event Morales is reported to have threatened to send in the Navy to ship the ore if JSB would not do it.

Mines Minister Jose Pimentel has reportedly clarified that a revision or reversal of the agreement can happen only after a government audit of JSB's investments in May next year.

"This is a sign of countries, including ones like Mongolia and Mozambique, moving to enhance the terms of trade in their favour," said Kameswara Rao, Executive Director - Energy, Utilities, and Mining, PwC.

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