South Korea's Posco has backed out from its earlier contract to set up a US $5.5 billion steel plant in India. The development is a letdown for a government aiming to boost the country's economic growth by enticing foreign investors.

A senior official of Posco's Indian branch said in a report by the Wall Street Journal that land acquisition for the project has become difficult due to the local people's protests against the venture thus the reason for the pull-out.

"The project is off. But we are open to discuss alternate sites," the source, who requested not be named, said.

The infrastructure would have been built in the iron-ore-rich area of Karnataka, south of India. Further reports claim that the facility could have produced up to six million metric tons of steel each year.

In 2010, Posco signed the agreement wherein the Indian government was tasked to look for a land to be acquired. The process, however, was stopped in July 2011 because the protests have already intensified. Just recently, Posco took back US $10 million it had given the government representing the advance fee for the land.