Bolivia tells Jindal to stick to contract or go

Bolivia warned India's steelmaker Jindal on Tuesday to stick to terms of a multibillion-dollar contract it signed to develop the El Mutun iron deposit or withdraw from the project.

Relations between Jindal Steel and Power and the Bolivian government have been rocky for weeks. Bolivia's mining ministry has accused the company of seeking significant changes in the deal.

In an interview with local radio network Erbol, Mining Minister Jose Pimentel said Jindal must adhere to the terms of the contract signed in mid 2007 or call off the deal.

The future of the contract "depends on Jindal ... If Jindal decides to rescind the contract, well, we have to take that risk," said Pimentel, adding the contract will not be changed because the leftist government of President Evo Morales "categorically rejected" Jindal''s proposal.  

"We can't allow (Jindal) to ignore obligations that are outlined in the contract," he said.

Sergio Alandia, head of El Mutun Iron and Steel Co, a state-run unit charged with overseeing the El Mutun project, said Jindal still wants to invest $2.1 billion in El Mutun but would like to reduce its production targets.

"They wanted to cut production of steel and reduce the quality of the steel ... and sell the produce to the national market and neighbouring markets, instead of international markets," Alandia said.

 He said Jindal wants to produce 40 percent less steel and around 20 percent less iron a year than initially agreed.                                            The 40-year contract gives Jindal the right to mine about half the El Mutun site, which is believed to contain one of the world's largest iron ore reserves, though they are said to be of medium-grade quality.

"(They should have invested) some $600 million in two years, but they did not even hand in their investment plan ... They have not paid the exploitation royalties," Pimentel said.  

The head of the Jindal's unit in the Andean country, Arvind Sharma, said late last month that the company is committed to investing $2.1 billion in the project and that relations with the Bolivian government had improved "after certain confusions" about the contract.  

The project will allow Bolivia to develop a steel-making industry for the first time and is the biggest proposed investment in a single project in Bolivian history.