South Korean firm Posco says it has scrapped a proposed steel project in the Indian state of Karnataka after delays and local opposition.
The company said it had dropped the $5.3bn (£3.5bn) project in the state’s Gadag area after protests against the acquisition of land for the plant.
The decision is a blow to India’s efforts to attract foreign investment.
But Posco is proceeding with a planned $12bn plant in eastern Orissa state, which has faced similar protests.
The firm blamed its decision to pull out of Karnataka on “the significant delay in the project and inability to get land in Gadag”.
“Progress on land acquisition was held back due to agitations by some farmers and religious leaders,” the firm said in a statement, which made clear that land acquisition talks had come to a halt as far back as July 2011.
Posco and Karnataka had signed the agreement three years ago and the plant, when completed, was to produce 6 million metric tons of steel a year with iron ore to be mined locally.
Earlier this month, the state government returned $10m (£6.6m) to Posco that the firm had deposited as an initial payment for acquiring land for the plant.
Posco, however, said it may consider returning to Karnataka “in future, if we get an attractive business proposal from the state”.
The much larger Posco project in Orissa has also faced stiff opposition from local people campaigning to save farmland and woodland.
But the land acquisition for the project has been completed, and the plans to build the plant are on track.
The Orissa plant, which will be based in the port city of Paradip, was conceived in 2005 and is India’s single biggest foreign investment.
It is expected to create nearly 50,000 jobs.