KABUL): In the wake of rising security risks, a group of six Indian companies has been considering cutting its initial investment in the Hajigak project in central Bamyan province to $1.5 billion from $11 billion, a report said on Wednesday.
Bloomberg, a premier site for business and financial market news, quoted two officials with direct knowledge of the matter as saying the Afghan Iron & Steel Consortium, led by Steel Authority of India Ltd. might slash investment in the mine to almost an eighth of its original plan.
The mountain ridges 100 km west of Kabul are estimated to contain 1.8 billion tonnes of ore. President Hamid Karzai’s Cabinet awarded the rights to mine three out of four blocks to the group in 2011.
The perception of risk surrounding the key Hajigak project may cast a shadow on Afghanistan’s plan to rebuild its economy as it seeks more than $30 billion in foreign investment for roads, mines and railways.
“Safety has to be paramount,” the site quoted Giriraj Daga, a Mumbai-based analyst at Nirmal Bang Equities Pvt. “Unless there is a complete assurance of safety, there’s no point investing even $100 million in the project.”
CS Verma, chairman of SAIL, said the Indian group was yet to sign a final contract with the Afghan government and declined to comment further.
The report said the group was now planning to build a steel mill that could produce 1.5 million tonnes a year, one-fourth of the earlier plan, which would cater to Afghanistan’s domestic demand.
The original plan envisaged building an 800 megawatt power plant, power transmission lines and a 900km railway line from Bamyan to Zahedan in neighbouring Iran.
The steel group sought $7.8 billion in interest-free loans and aid from the Indian government, which considers Afghanistan as an important strategic partner, in 2011. The request is still pending, one of the two officials said.
India, which has given more than $1 billion in aid to Afghanistan since 2002, is competing with China for access to the country’s resources, which are estimated at $1 trillion, according to an estimate by the US Geological Survey.
Work on two Chinese projects has already begun. Amu Darya oil basin, run by China National Petroleum Corporation is operational, while the Aynak copper deposit is being developed by Metallurgical Corporation of China.
“The situation in Afghanistan is very uncertain and fraught with risks,” said C. Uday Bhaskar, a New Delhi-based analyst at the National Maritime Foundation, a research group that specialises in security affairs.
“Even though the investment is not devoid of any returns in the longer run, companies should move cautiously.”
A spokesman for the Ministry of Mines and Petroleum, Muhammad Rafi Rafiq Siddiqui, told Pajhwok Afghan News the ministry was in contact with the Indian group.
Agreement on various issues concerning the project has been reached, he said, adding there had been no serious security risks that could undermine the mine’s development.