KOLKATA (miningweekly.com) - The Indian government will initiate bilateral talks with the Afghan government to salvage a floundering $10-billion mining and steel project in that country.

Discussions between the two External Affairs Ministries were expected to decide the fate of the Indian mining and steel mill investments conceived in 2011, which have made little headway to date.

According to an official in the Steel Ministry, the proposed talks would include the logistical and infrastructure support expected from the Afghan government and the security environment, but most importantly some recent statements emerging from the new government in Afghanistan casting doubts on the award of mining and steelmaking projects at Hajigak.

The Indian government would seek a response from the Afghan government on statements made in Parliament in which representatives of the Afghan government claimed “irregularities” and even indications of a legal process to cancel the contract awarded to a consortium of Indian companies by the previous Afghan government, headed by President Hamid Karzai, the official said.

The Steel Ministry took note of these reports and raised concerns with the Indian External Affairs Ministry, which would now seek an official government-to-government response on the cloud hanging over the project, the official added.

Meanwhile, the Afghan Iron and Steel Company Limited (Afisco), the consortium led by Steel Authority of India Limited (SAIL), has been directed to remain engaged with the projects despite the consortium having reservations over the security environment in Afghanistan and several constituent members favouring scrapping the investments.

Afisco was crucial for India’s geopolitical interests in Afghanistan and in the interest of the country’s diplomacy, the government had asked the consortium not to take any decision on the scrapping of the project, he added.

Rashtriya Ispat Nigam Limited (RINL), one of the Afisco members with an equity stake of 18%, has in the meantime communicated to the Steel Ministry it wishes to reduce its stake to a bare minimum as the south India-based steel mill did not want to remain invested in an "uncertain" project, the official said.

Apart from SAIL and RINL, other members of the consortium included iron-ore miner NMDC Limited, private sector steel companies such as JSW Steel, Jindal Steel and Power Limited (JSPL) and Monnet Ispat.

The $10-billion project conceived in 2011 proposed setting up a mining project for the 1.2-billion-tonne iron-ore reserves in the province of Hajigak, a six-million-tonne-a-year coal mine and an 800 MW thermal power plant.