Posco closer to iron ore access on SC decision

South Korean steel major Posco?s planned $12-billion steel project in Orissa cleared a major hurdle on Friday with the Supreme Court order paving the way for it to get a mining licence in the state. The apex court set aside an earlier Orissa High Court order that had quashed the state government?s recommendation to allot an iron ore mining licence for 600 million tonnes to the company in the Khandadhar hills in Sundergarh district.

A bench comprising of justice RM Lodha and justice SJ Mukhopadhyay asked the Centre to consider all the objections raised by various parties and take a decision. The objections were raised by another mining firm, Geomin Minerals and Marketing, which held that its application for mining licences was submitted before Posco?s and hence the state government was wrong in recommending Posco?s case prior to its. While the state government had challenged the high court?s order as it had quashed its right to provide the mining licence, Geomin had challenged it on the grounds that the order had gone beyond its prayer and not addressed its grievance.

The onus now is the central government to determine which companies get the licences and in what order. There are several other firms apart from Posco and Geomin that have applied for mining licences.

Since the central government has been keen to see that the project progress as it is billed as one of the largest foreign direct investments in the country, the development is seen as positive for Posco. However, for the project to move ahead full steam, it needs a final environmental clearance from the environment ministry, and the land acquisition process needs to be completed without any major protest from the local population.

The positive sentiment that followed the SC?s order was echoed in the company?s response to the development. ?We believe that this will significantly help to expedite the project,? YW Yoon, chairman and MD, Posco India, said in a statement. ?We are happy that it has come at a time when there has been significant progress on the land clearance work for the project.?

It?s been eight years since Posco first announced its plans to set up a project in the country. The company signed an agreement with the Orissa government in June 2005 to set up the steel plant on 4,004 acres of land. It is seeking 2,700 acres to begin the project?s first stage, which involves setting up two plants of 4 million tonnes per annum capacity in two phases. So far the company has been able to get physical possession of around 1,700 acres.

Posco maintains that if it gets the required land in the current year, the first phase of the plant may be commissioned some time in 2018.

As far as the environmental clearance for the project is concerned, a final nod from the environment ministry is awaited, though it is expected to be favourable to the company. In March 2012, the project?s environmental clearance that was granted in 2011 was suspended by the National Green Tribunal since it was felt that issues related to the area?s tribals were not addressed adequately. The company subsequently applied for the revalidation of the clearance, after which a sub-committee of the expert appraisal committee visited the site and is understood to have given a positive report. The report is pending clearance from environment minister Jayanthi Natarajan.

However, the biggest hurdle the company may face even after the required approvals is protests from rights activists and environmentalists. News agencies quoted a former tribal affairs minister from the BJP taking a hardened stance. ?At no cost would Posco be allowed to enter into the hills. We will not allow any mining,? Jual Oram, the former minister for tribal affairs who represented Sundargarh constituency in Orissa, was quoted as having said. Oram has been leading the fight against the company?s mining plan.

Apart from Posco and Geomin Minerals, there are around 224 applicants for mining licences. These include the state-owned Kudremukh Iron Ore Corporation, Essar Steel, Jindal Strips, SSL Energy, MSP Metallics, Mesco Kalinga Steel, Adhunik Metalliks, Uttam Galva Steel and Bhushan Power & Steel, all of whom have applied for iron ore licenses in the area. The central government would now need to listen to the objections of all of them before it prioritises and finally decides to grant the licences.

Posco?s contention is that the rule has been framed in such a manner that the prospecting or mining licence is granted to the person or entity who is in the best position to utilise the mine in a ?scientific, eco-friendly and economically efficient manner?.

Steely resolve

* The world?s fourth-largest steel producer has waited for almost eight years to get necessary government clearances, land and an iron ore mining licence

* Posco signed an agreement with the state govt in June 2005 to set up the steel plant on 4,004 acres near Paradip. It is seeking 2,700 acres to begin the project?s first stage

* Of the total 2,700 acres, the state govt has acquired around 1,800 acres. The Orissa govt has already handed over 548 acres to the South Korean steel maker

* The project?s first stage involves setting up two 4 mt plants in two phases. At full production of 12 mt, it would account for 16% of India’s total annual steel output

* The company, based in Pohang, South Korea, says if it gets the required land in the current year, the first phase of the plant may be commissioned sometime in 2018

* Shares of Posco, which counts Warren Buffett as a shareholder, cut their losses after the news to end down 1.24% in a wider Seoul market that closed 1.8% lower

Posco globally: Posco has hedged its bets and raised its investment in other emerging countries like Indonesia to make up for the slow progress of the $12-bn Indian project. Construction of the steel plant in Cilegon, Indonesia, is set to be completed in November 2013. The plant is likely to produce 3 mt of molten iron