Jindal Steel & Power (JSPL) has terminated its contract with Bolivia to invest $2.1bn in an iron ore and steel project over fuel supply issues.

The Bolivian government earlier awarded a 40-year contract in 2007 to JSPL for mining about half the El Mutun site, which contains huge reserves of iron ore.

As part of the contract, JSPL was expected to construct the Andean country’s first steel plant, which failed to start due to disagreement between the government and the company.

The contract failed due to non-fulfillment of contract conditions by the Bolivian government, according to a statement from JSPL.

JSPL was to invest $ 2.1bn in iron ore mining, pelletization (10 million tons per annum), DRI (6 million tons per annum) and steel making (1.7 million tons per annum) in Bolivia.

The company had given a 30-day window period last month to the government to resolve all issues.

According to media reports, the government could make it clear as to how much of gas will be supplied for operating the project.

An agreement for supply of 10 million standard cubic metre per day (mmscmd) of natural gas for the project was to be signed by Bolivian government within 180 days of signing of the contract. However, the government was willing to commit 2.5 mmscmd of gas supply showing shortage.

An investment exceeding $90m and investment commitments of over $600m for purchase of technology and machinery have already been made by the company under the contract.

The company official statement said Bolivia government did not provide substantial land for the project until 2010.

It further said the Government of Bolivia encashed bank guarantee of $18m in March 2010 and bank guarantee of $18m on 1 May 2012 on flimsy and legally untenable grounds.