ArcelorMittal has signed a Memorandum of Understanding (MoU) to spend INR300bn ($6.4bn) to build a 6Mt/y steel plant in Karnataka, India.

Local sources said it was signed on Thursday, June 3 at the Global Investors Meeting organised by the Karnataka government.

"Once we have seen progress in Karnataka ahead of other (states), we will start here first and then wait and see what is happening in other states," ArcelorMittal chairman Lakshmi Mittal said.

Karnataka has iron ore reserves of 3.4bnt, being the second largest in India. The state is targeting steel production of 25Mt/y of steel production by 2010, which will be almost around three times more than current production.

ArcelorMittal and Posco, of South Korea have faced two-year delays 37Mt of capacity in the eastern state of Orissa because of the long time in allocation of mining leases and local villager’s protests against land acquisitions.

Local sources say that Posco is to also sign an agreement with the Karnataka government to build a 6Mt/y integrated steelworks.

Its five-year MoU signed with the Orissa state government in June 22, 2005 for a 12Mt/t steelworks is about to lapse. After years of delays and battling local hostility towards its project, Posco may well have lost interest.