Hanoi: In a bid to break a four-year deadlock involving Tata Steel's $five billion project, Vietnam has sought financial assistance of $100 million from India towards payment of land compensation cost.
"Government of Vietnam has requested Indian government to assist by giving USD 100 million for site clearance for the project," Vice Minister of Industry and Trade of Vietnam Le Xuan Quang said.
The project has been stalled after the provincial government estimated the acquisition cost at $200 million for around 4,000 acres of land, an amount Tata-Steel was not happy with and refused to pay.
Vietnam seeks $ 100 mn from India for Tata project
This resulted in Indian business giant not receiving the investment license for its 4.5 million-tonne steel plant at Vung Ang Economic Zone in Ha Tinh province.
The issue has also been taken up by at the highest level by Prime Minister Manmohan Singh, External Affairs Minister SM Krishna and Former Finance Minister Pranab Mukherjee.
Sources close to the project said the land cost asked from Tata is very high as compared to what has been taken from Taiwan-based Formosa group to set up a steel plant in the same province.
When pointed out that Vietnamese government was paying part of the land compensation for the land given to Formosa group, Quang said the country has been affected by the global economic slowdown and it does not have money for site clearance for the Tata-Steel project.
"Vietnam has also been affected by global economic crisis and we do not have money for site clearance (for the Tata project). We have requested Tata to pay the money," he said.
"Our government is very active in addressing the pending issues between Tata and local authorities," Quang said but warned that further delay in finalising the land compensation may result in increase in land acquisition cost.
Sources said Tata's patience was running thin as it was unhappy over the way the whole issue has been handled by Vietnamese authorities. As per Vietnamese law, the investment license has to be issued by provincial authorities.
The project is to be implemented by a joint venture in which Tata Steel holds 65 per cent stake while Vietnam Steel Corporation holds 30 per cent and the balance is with Vietnam Cement Industries Corporation.
An initial pact for the $5 billion project was signed among the three companies in 2007 and a final agreement was reached in August 2008. When asked about the issue, Indian diplomatic sources said the project was an important one and India has been doing its best to ensure resolution of the issue.
Consul General of India in Ho Chi Minh city Abhay Thakur said government was hopeful of Tata-Steel being issued the investment license soon.
"The matter has been taken up at very high levels on both sides. We remain hopeful that investment license will be forthcoming subject to commercial and technical issues being resolved to mutual trust," he said.
People close to the project feel that it was unfair on part of Vietnam to hold back investment license as India has been helping the country in various areas for last few decades, including in strengthening their defence capabilities.
They said Tata-Steel felt discriminated as the land given to it originally for the plant was given to Formosa in 2008 and an alternative plot was offered to it in 2009. The issue was raised by Prime Minister Manmohan Singh when Vietnamese President Truong Tan Sang visited New Delhi in October last year.
In May last year, Vietnamese Prime Minister Nguyen Tan Dung too had given an assurance to implement the project when Mukherjee had called on him.
Source Press Trust of India