The MoU between South Korean major Posco and the Orissa government for the proposed $12-billion steel project in the state lapsed on July 22, at the end of its five-year term, and hasn?t been renewed since. This has put the project?already facing several hurdles, including a recent adverse verdict by the Orissa High Court on Posco?s right to prospecting licence and delays over forest clearance?in further jeopardy.
Posco India spokesperson Simanta Mohanty confirmed that the MoU had not yet been renewed. ?The state government is looking into the application,? he said.
Although the state government had kept on saying till July 22 that the MoU would be renewed, what is significant is a clause in the MoU itself.
As per the MoU, ?no such extension shall be considered unless the company concerned has made substantial progress on implementation of the project in terms of construction, erection of plant and machinery and investment at site to the satisfaction of the state government in these five years in implementing the first phase as envisaged in this MoU.?
What this translates into, according to top government sources, is that the first phase should have seen 6 metric tonne (mt) production of steel being commissioned, which has not happened. The plant remains mired in controversy over land acquisition and its painful quest to get separate clearances for the prospecting licenses, steel plant and port connectivity.
In Bhubaneshwar, Orissa steel and mines minister RN Mohanty told FE: ?Posco India has applied for renewal of MoU for five years. We are examining the application.?
?The problem started when the South Korean steel major, which thought that it would get an SEZ status for the entire project, failed to get it and had to apply for separate clearances for its plant and port projects, including from the ministry of environment and forests (MoEF),? said a source. This quickly got mired in controversy with resistance to land acquisition building up fast and court cases further delaying the projects.
Despite being India?s biggest foreign investment projects at $12 billion, and receiving substantial support from the Centre and the state, the project has not been able to get off ground. On June 22, minister Mohanty had told FE: ?We have received the proposal for renewal of the MoU from Posco-India and it?s being examined by Industrial Promotion and Investments Corporation of Orissa (IPICOL).?
An Ipicol official had said, ?As both the parties have made serious endeavours towards the project, there is no point in not renewing the MoU.? But, the application has been pending with the state government for quite sometime.
Meanwhile, two separate incidents have dealt a blow to Posco India?s plans. First, the Orissa High Court struck down a state government proposal to grant prospecting licence to Posco India for the Kandadhar iron ore mines, saying the ?relative merits are insufficient? in deciding in Posco India?s favour.
There were 226 applicants for the mines and the government has been told to hear them afresh.