BHUBANESHWAR: A crude bomb exploded in a village in eastern India, killing three people involved in protests against a $12 billion steel plant project by South Korean giant Posco, police said Sunday.

Police claimed the dead victims were suspected of making bombs themselves when one of them exploded Saturday in Patana village in Orissa state, but a protest group spokesman said they were attacked by supporters of the project.

“Three people died and one was crucially injured when the crude bomb went off. We suspect that the protesters were making bombs and one might have accidentally exploded,” district superintendent Satyabrata Bhoi told AFP.

The village has been the epicentre of protests since Posco, the world's fourth-biggest steelmaker by output, signed a pact with the state government in 2005 for the plant on 1,600 hectares  of land.

Local residents say the planned steel mill, touted as India's biggest single foreign direct investment, would interfere with their traditional forest-based livelihoods and uproot them from their homes.

Last month the state government started acquiring land from farmers for the project but halted it midway amid fresh protests from villagers. The land acquisition process was due to begin again on Monday.

“Since the land acquisition process was to start again, the anti-Posco activists could have been making bombs,” the chief district administrator Satya Kumar Mallick told AFP.

But a spokesman for one of the protest groups claimed the victims had been attacked by supporters of the contentious project.

“The authorities are indulging in false propaganda so that they can unleash more police violence on us,” said Abhay Sahu of Posco Pratirodh Sangram Samiti.

“In fact, three of our people died when Posco supporters hurled bombs at our people,” Sahu added.

The Posco deal has been watched as a test case by foreign investors eager to enter India's fast-growing economy but wary of the potential for environmental and other concerns to derail their plans.