By BS Reporter
Days after it called off its showcase $2.1-billion Bolivian venture, Jindal Steel & Power Ltd (JSPL) seems to be caught in a major legal tangle with the country’s government. The South American nation has initiated criminal proceedings against senior executives of the company, forcing it to seek the intervention of India’s external affairs ministry.
“The Jindal management has written to External Affairs Minister S M Krishna on the said matter, but there has been no response yet,” a company spokesperson said. Bolivian mines minister Mario Virreira had invited JSPL executives for reconciliatory talks on July 20. But things became difficult with the company executives unwilling to hold talks there. They wanted discussions to be held at a “neutral” place or through video conferencing in view of the legal cases registered against senior JSPL employees.
A dramatic turn of events took place last week as the Bolivian government confiscated JSPL’s property and equipment at the project site in Porto Saurez and arrested two employees there, who were later released. The Bolivian army was deployed at the site last Friday. JSPL had criticised the action, calling it “harassment and victimisation of its employees”.
|THE FALLING OUT|
The conflict relates to a 2007 contract between the two sides for mining 20 billion tonnes of iron ore reserves in the El Mutun mines and setting up infrastructure facilities, including plants for producing steel, sponge iron, and power. The deal was terminated by JSPL on July 16, after a 30-day prior notice, as the two sides failed to resolve disputes over gas and land allocation for the project.
The Bolivian government had in April this year initiated criminal proceedings against at least three top executives of JSPL. The proceedings were initiated over the company’s failure to invest in accordance with the contract, according to a source.
Meanwhile, the company also revealed how faulty initial estimates of gas reserves linked to the project were at the core of the conflict. According to the original contract, the Bolivian government was to supply 10 million metric standard cubic metre per day (mmscmd) of gas.
However, an advanced survey of the available gas reserves done in 2010 found only 9.2 trillion cubic feet (tcf) was available against the original projection of 27 (tcf) of gas reserves.
“As their reserve estimate fell drastically, the Bolivian government suddenly realised they did not have enough gas. Then they started accusing us of asking for more gas. It was when the Bolivian government delayed signing the gas contract on one pretext or the other that we started getting suspicious,” a JSPL spokesperson said.
The gas supply was to be used to run the planned six million-tonne (MT) capacity sponge iron plant, part of the overall project which included mining 20 billion tonnes of iron ore from El Mutun mines to feed a 1.7 MT per annum capacity steel plant. A 10 MT per annum pellet plant and a 450-Megawatt power project were also to be set up by JSPL subsidiary Jindal Bolivia Ltd (JBL) under the venture.
JSPL also blames Bolivia for failing to hand over adequate land for starting even preliminary work. “They could not acquire that land as it became stuck in litigation. Then they offered us another piece of land which, too, they could not hand over. Even on Tuesday, they have not handed around 250 hectares to us,” the JSPL spokesperson said.
The last nail in the coffin of the deal was the Bolivian government’s move to encash the bank guarantee for the project twice at $18 million each. The dispute over the bank guarantee is already pending in the International Court of Justice.