India has been forced to suspend efforts to acquire land for its largest foreign direct investment project, a long-delayed $12 billion steel plant to be built by South Korea’s POSCO, in the face of intense protests by local villagers.

After a five-year logjam over the project, POSCO’s hopes were raised when the Environment Ministry gave it a final go-ahead in May. Since then, however, women and children have formed human rings around the site, and a local government official said Tuesday that work had been “halted indefinitely.”

Farmers across India have been resisting efforts to throw them off their land to make way for industry, mining or housing projects, saying a colonial-era law that gives the government the rights to seize farmland often leaves them inadequately compensated.

Protests have left many big-ticket investment projects stalled, and the government says it plans to introduce new legislation in the next session of parliament to make land acquisition fairer for farmers and easier for business.

But with no consensus on how to achieve those goals within the ruling coalition, analysts say the legislative process could be tortuous.

“The law has to reflect what people would accept as legitimate,“ said Barun Mitra of the Liberty Institute. “Hopefully the government will demonstrate its intent and a sense of urgency that the law needs to be changed.”

The Indian government sees the project as important to help revitalize the country’s impoverished eastern state of Orissa, promote industrialization and reverse a two-year slump in foreign direct investment. But it now might need to go back to the negotiating table and offer villagers more money to relinquish their land.