Vice President Jusuf Kalla is attempting to convince major Indian major steelmakers, including Essar, Tata Steel and Ispat Steel, to invest in Indonesia.
Kalla, who is currently on an official visit to India, told India's steelmakers that now was an opportune time for them to take advantage of Indonesia's growing demand for steel.
He said that the development of the steel industry would receive special attention from the government so as to enable Indonesia to meet its growing demand.
Despite having abundant iron ore resources, Indonesia still imports steel products, mostly from China, Japan and Russia, to meet annual domestic demand of about 3.5 million tons a year.
At present, Indonesia produces about 2.5 million tons a year, with state-owned steel firm PT Krakatau Steel supplying about two million tons.
Local products have been losing out to the competition from imported steel as the products made by Krakatau Steel are more expensive than those produced by foreign steelmakers.
Local producers, which import most of their iron ore needs from Brazil and Australia, are apparently unable to compete with the foreign competition.
According to figures from the Industry Ministry, steel produced in China costs around US$300 per metric ton, while that produced by Krakatau Steel costs some $400.
Accordingly, in order to expand and to improve the efficiency of Indonesia's steel industry, the government, in collaboration with Krakatau Steel, is encouraging foreign investors to participate in the planned development of a new US$500 million steel plant with a production capacity of about 4.3 million tons per year.
"We are interested in the Indian steel companies as they are able to produce steel more efficiently," Kalla was quoted by Antara as saying.
Among the major Indian steel companies that have expressed an interest in investing in the project is Tata Steel, one of the biggest steel producers in the world.
The government has proposed South Kalimantan as the site for the new steel mill. The province is not only rich in iron ore but also coal to supply cheap energy to power the mill.
During its visit to Mumbai, the Indonesian delegation, which included Industry Minister Fahmi Idris, also met members of the Indonesia-India chamber of commerce.
The Indian members of the chamber also expressed interest in taking part in the government's infrastructure development program, including the planned construction of 1,000 kilometers of tolled expressways in Java, airports and a number of coal-fired power plants.
Several major Indian companies, including Archelor Mittal, now the world's largest steelmaker, and textile producer Indorama, have long had operations in Indonesia.
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