Posco project fate hangs in balance

The fate of South Korean major Posco Steel’s $12-billion project in Odisha hangs in balance with the central government’s new rules under which the company needs to acquire iron ore only through bidding and the state government looking at providing it iron ore linkage from Odisha Mining Corporation (OMC), which is a state government PSU.

The focus on the viability of the project, the MoU for which was signed in 2005, gained attention once again when it did not figure in the joint statement of Prime Minister Narendra Modi and South Korean president Park Geun-hye.

In the past, the project had figured in all the bilateral talks between India and South Korea.

The project which had earlier been mired in delays over land acquisition received a setback when recently the new mining rules (MMDR Act) stipulated that only existing mining leases could carry on and fresh ones could not be granted on preferential basis, but could be procured only through an auction route. This meant that Posco could get a captive iron ore mine only by participating in an auction, something which disinterested the South Korean firm and sources said it was contemplating pulling out of India.

However, the state government is interested in salvaging the project and is reported to have shown willingness to work out a plan to provide iron ore to the plant by providing linkage facility from Odisha Mining Corporation (OMC), which is a state government PSU. Since the OMC has an existing mining lease by forming a JV with it, Posco would be able to source ore without having to participate in an auction.

Posco-India’s general manager IG Lee could not be contacted on Tuesday.

Odisha’s steel & mines minister Prafulla Mallick told FE Posco India has not been in contact with the state government for a long time. “They are not even responding to our offers to facilitate the implementation of the project,” he said.

The South Korean steel major Posco signed an MoU with the Odisha government in June 2005 to set up a 12 million tonne steel plant. But, the project remained mired in delay due to local resistance, official hassles, statutory hindrances and legal tangles. The South Korean company, which set up an Indian arm Posco-India based in Bhubaneswar, sought 4,004 acre of land near the port town of Paradip in Jagatsinghpur district to set up the project.

The resistance by the locals who refused to part with their land delayed land acquisition. Then the Union environment and forest ministry (MoEF) delayed in according statutory clearances. Meanwhile, the Forest Right Act came into force and the project had to comply with it .

Finding that acquisition of the required 4,004 acre would be difficult, Posco-India downsized the project capacity to 8 million tonne and offered to start the project over an area of 2,700 acre.

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