Nov. 23 (Bloomberg) -- ArcelorMittal, the world’s largest steelmaker, is considering setting up a steel plant in India’s southern state of Karnataka, its third in the country, to tap demand in the world’s second-fastest growing major economy.

The company submitted its interest to set up a plant of as much as 6 million metric tons to the state government on Nov. 21, Vijay Kumar Bhatnagar, the head of ArcelorMittal’s India unit, said in a telephone interview today. The feasibility study for the plant will be completed within four months, he said.

“This plant is in addition to our other two planned plants,” Bhatnagar said. “India’s demand for steel is set to grow.”

India’s steel demand may rise as much as 10 percent this fiscal year, almost double the pace previously estimated, as the government spends more on infrastructure, according to the steel ministry. Demand grew by about 7 percent in the first six months of this financial year ending March 31.

In October 2005, ArcelorMittal said it plans to set up a factory with a capacity of 12 million metric tons in Jharkhand state. The following year it announced another plant of the same size in neighboring Orissa state. Since then, the company has been unable to secure land for the two $10 billion factories.

ArcelorMittal’s Chief Executive Officer Lakshmi Mittal is scouting for alternative locations because no progress is being made at the existing sites, the Press Trust of India reported on Oct. 28.

ArcelorMittal isn’t alone in having trouble getting land. Posco, South Korea’s biggest steelmaker, which announced a $12 billion plant in the eastern state of Orissa in 2005, has yet to begin construction.

“The Karnataka government is willing to offer an alternate corridor if Mittal looks to change locations,” Minister of State for Steel A. Sai Prathap said on Nov. 4.

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net

Last Updated: November 23, 2009 08:56 EST