The signing of a mining contract by a consortium of Indian companies hoping to develop the Hajigak iron-ore reserve, some 180 km from Kabul, is being delayed by the conditions proposed by the Afghan government.

The Afghan government is insisting on a clause stipulating that the Indian consortium start exploratory projects within six months of signing the contract agreement, or the contract will be terminated, an official with one of the companies in the consortium says.

It has been more than a year since the consortium of Indian companies, under the banner of Afghan Iron & Steel Company Limited (Afisco), bagged the rights to develop the Hajigak reserves through competitive bidding. However, since that time, a mining contract with the Afghan Mines Ministry could not be concluded because of the stiff conditions, the official says.

According to the official, there are several justifiable issues raised by both sides. From the Indian point of view, investments in large projects, particularly in the mining and steel production facilities, in the Afghan environment are extremely challenging and a six-month project start-up schedule might not be practical or feasible.

From the Afghan point of view, Indian companies are not parti- cularly reputed for timely project implementation, particularly in the mining sector, hence the insistence by the Afghan Mines Ministry on definitive timelines for the Hajigak project.

In 2011, Afisco, which is led by the country’s largest steel producer Steel Authority of India Limited (SAIL), won the rights to develop the 1.8-billion-ton iron-ore reserves in the Hajigak province.

Afisco, which also includes NMDC, Rashtriya Ispat Nigam Limited (RINL) and JSW Steel, plans an investment to the tune of $11-billion for the development of the reserves, a steel production unit and associated logistics and infrastructure necessary for evacuation of ore and transportation of finished steel.

However, according to NMDC and SAIL chairperson C S Verma, there is no ‘stalemate’ as far as the project is concerned.

“There are one or two minor issues but for the rest, the document is frozen. It is normal for any contract to take time,” Verma was quoted in the local media.

With mineral-rich countries across the world facing the politi- cal challenge of resource nationalism, Afghanistan has proposed to lay down a cap of six-million tons a year on iron-ore exports from Hajigak. However, SAIL has failed to agree to the limit on exports, claiming that such a condition was not part of the request for proposal issued by the Afghan government during the bidding process.

Another issue that is causing the delay is Afghan government’s proposal that the contract between the parties be liable for termination in case of failure to meet the six-month production target.

SAIL has argued that global iron-ore markets are subject to cyclical vagaries in supplies and pricing and there would be times when production and selling fixed volumes might not be economically feasible.

A fresh round of negotiations between Afisco and the Afghan Mines Ministry was scheduled shortly in an effort to sort out these contentious issues, officials say.