International banks are believed to have refused to fund the $290-million greenfield project as an aftermath of the global steel-industry slump. Mittal had announced the setting up of the plant over two years ago. The project was to be the largest of its kind in the Gulf.

In this period, the Mittals, however, have not been able to start construction work on the project due to lack of finance. Sources close to the Mittals said, "There is only a representative office at the site now. The project, for all practical purposes, is indefinitely deferred." The group has already acquired 54 hectares of industrial plot in the South Hidd region of Bahrain. A tie-up for gas supply has also beenfinalised with Bahrain National Gas. Apparently, with the ongoing slowdown, and low-priced imports being available from East Asia, Russia and CIS, the demand for sponge iron has declined in the Gulf.

Ispat Industries, the flagship of Ispat group in India, was supposed to participate in the equity, which would be directly pumped in by the Mittal family along with the Bahrain government as a partner. Ispat Industries itself has suffered from the long-standing recession in the domestic as well as global steel industry, with its own project in Maharashtra taking longer than expected to go on stream, and suffering a cost overrun of around Rs 1,000 crore. The total outstanding debt of the Ispat group in the steel business is around Rs 4,000 crore, according to reports.

The Bahrain project was to be the family's first business venture overseas after the formal split in assets in the early '90s. Following the split, eldest brother Laxmi Mittal took charge of the international steel business of the family and hasnow emerged as the world's third-largest steel producer with a 18-million-tonne capacity. Pramod, and youngest brother Vinay, took charge of the family's Indian operations - with interests in steel, power, telecom, textile and proposed projects in refining and infrastructure.

"This was almost inevitable, given the existing global atmosphere in the steel industry. Internationally, steel is now accepted as one of the lowest return-on-equity businesses, and especially in an atmosphere of financial panic such as the one prevails now, financing the project was always going to be difficult," said an industry observor.

In fact, even Laxmi Mittal, who has gone from strength to strength in the international steel industry, is suddenly finding it difficult to push through a vital capital-raising drive at the price he wanted to strike. It is believed that the markets have valued his issue at nearly half the rate that merchant bankers had initially asked for. The elder brother has been successful in turning sickunits into profitable ventures across the globe.