The future of a proposed six-billion dollar steel plant in eastern India was in doubt Saturday after the government raised questions about environmental clearance given for the project.
Jindal Steel and Power's proposed six-million-ton-a-year steel plant in Angul town is the fourth major project to face problems in the mineral-rich state of Orissa.
The environment ministry asked the company on Friday to explain why clearance for the project should not be revoked, accusing Jindal Steel of violating the terms of environmental approval granted in 2007.
If Jindal Steel's clearance is revoked, it would be a major setback for the ambitious expansion plans of India's fourth-largest domestic steel producer.
Jindal Steel was not supposed to build anything on forest land that is part of the project area. But the Orissa state government has reported construction activity, such as building of roads and storage facilities, is taking place in the forest area, the ministry said.
Sushil Maroo, Jindal Steel's chief financial officer, said the company has not received any environment ministry notice yet.
"We haven't violated any environmental laws. Our project has both environmental and forest clearance," Maroo said. But he added some "minor infrastructure work" may have taken place on the forest land.
Britain's Vedanta Resources' proposal to mine Orissa's remote Niyamgiri Hills for bauxite was recently rejected by the environment ministry, fearing it would damage the ecology and affect local tribes.
Mega steel projects by ArcelorMittal, POSCO and Tata Steel have also been unable to get off the ground for the last five years as environmental laws, tribal rights and protests by landowners have made it tough to acquire land.
Jindal Steel and peers such as Tata Steel and JSW Steel are trying to get massive steel projects started as soon as possible to take advantage of domestic demand, which is expected to grow more than 10 percent annually over the next decade to feed a fast-growing economy.
In the past, when India's environment ministry was seen as little more than a "rubber stamp", some companies embarked on unauthorised construction but Environment Minister Jairam Ramesh has shown a keenness to police the rules.