Fast-tracking Posco

Written by Sudipta Datta | Updated: Jan 27 2010, 02:19am hrs
From October 2009, there has been a renewed thrust to South Korean steel giant Pohang Iron and Steel Company (Posco)s India plans. Tying up nicely with South Korean President Lee Myung-baks Republic Day visit to India as the chief guest, the final environmental clearance for the 12 million tonne steel plant was accorded on December 29. The critical central government push to the $12 billion projectIndias single largest foreign investment in the countryactually took four years.

The state government followed up the environmental clearance with another announcement that it was going to seek a referendum from the people of Jagatsinghpur district who have been opposing the project ever since the MoU was signed on June 22, 2005. Both the South Korean and the Indian governments had been exploring possibilities of Lee laying the foundation stone for the project during his visit. A team from the Centre visited Orissa in October and gathered from the state government officials that the situation on the ground was still not conducive to a high-powered visit. But that doesnt mean the project wont take off or be shifted out of the state (Karnataka has invited Posco to set up a 6 million tonne steel plant in the state)in fact, Posco officials are optimistic that construction in Orissa should begin this year. A critical mass of people is with us. We want to begin work on the boundary wall and on levelling the land as soon as possible, a Posco official said. Pohang-based Posco expects 34.4 million tonnes of crude steel output in 2010, and the company is pushing for a 12 million tonne addition from its India plant. Experts agree that theres too much at stake between the two countries, not least Indias desire to play a larger role in the Asia Pacific Economic Cooperation (APEC) bloc in which South Korea is a key member, and the signals from the Indian government are that government policies wont come in the way. Then again, bilateral trade between

India and Korea, a minuscule $0.55 billion in 1991 now stands at $16 billion; besides theres immense potential for growth in many sectors from nuclear, defence to manufactured goods. The Comprehensive Economic Cooperation Agreement signed last August has come into effect from January 1. South Koreas iconic brands Hyundai, Samsung and LG have a huge presence in India and Lee began his India visit from Chennais Hyundai factory.

According to estimates, India has already cleared around $2.7 billion in FDI proposals from South Korea, making it the seventh largest foreign investor in India.

But that doesnt mean Posco-Indias problems are going away in a hurry. According to the MoU, Posco-India is scheduled to set up the 12 million tonne steel project in three phases with 4 million tonne modules. Even as the steel plant comes up, the company will develop infrastructure like port, rail and road networks besides developing captive iron ore mines. And thereby hangs a tale. While Posco will require 600 million tonnes of iron oreand the MoU promises iron ore linkage to the companythe state governments recommendation for a prospective licence to the Korean giant for the Khandadhar iron ore mines in Sundergarh district is in court, with other claimants for the mines challenging the state governments decision. According to estimates, Orissa possesses 4,760.63 million tonnes of iron ore, which is about one-third of the countrys total deposits.

In the MoU, the Orissa government had agreed to recommend prospective licence and captive mining leases for 600 million tonnes to the company. The government promised to assist the company in firming up agreements with the Orissa Mining Corporation and other private iron ore leases in the state to meet a substantial portion of the iron ore requirement for the initial period of steelmaking. The Orissa government had also agreed to assist Posco in sourcing 400 million tonnes of iron ore for its existing plants in South KoreaPosco banks on imports for iron ore requirementsto have a long-term commercial supply arrangement from the open market. With Lee sure to bring up Posco when he meets Prime Minister Manmohan Singh, these are promises the Orissa government will find difficult to walk away from. But Posco-Indias biggest hurdle has been land, and the stiff resistance from locals. Of the 4,004 acres identified for the project, 2,958.79 acres is forestland, for which the ministry of environment and forests gave its final approval last month.

This area, off the coast of Paradip, once had mangrove forests, which have now disappeared, but has been encroached by betel vine planters. Of the rest, 400 acres belong to private parties and 600 acres is non-forest government land, but due to a huge movement against the project put up by the Left-backed Posco Pratirodh Sangaram Samiti, not an inch of land is with Posco till date. Yet, talks on the ground have intensifiedthough farmers of Dhinkia and Gobindpur who will be affected by the project are still adamantand the terms for the Resettlement & Rehabilitation Policy for the project are expected to be announced soon.

Sensing a new lease of life for the project, Posco signed an agreement with the Orissa Power Transmission Company (OPTCL) last weekdelayed by two yearsfor 24 mw from March 2012. It has already got the approval of the state government for setting up a captive port at Jatadhari on the Mahanadi, south of Paradip port, and an in-principle nod for a multi-product SEZ with the steel project as the anchor tenant. With the Centre pushing for Posco, and other steel giants like ArcelorMittal criticising land delays in the state, the Orissa government has to act on its promises.

According to estimates, Orissa has signed 49 MoUs in the steel sector alone worth Rs 1.98 lakh crore. Of these, only 29 are in various stages of production. Posco-India, for example, has invested only Rs 150 crore in its Rs 51,000 crore steel project so far. Orissa has a lot of catching up to do.