Posco India?s troubles refuse to go away. The world?s fourth-largest steelmaker?s India plans got another jolt on Wednesday when the Orissa High Court rejected the state government?s recommendation to hand over Khandadhar iron ore mines to the South Korean steel major, which is planning a 12 million tonne, $12-billion project in the state.

The verdict, which is most likely to be appealed in the Supreme Court, will set back Posco India?s project further, already delayed by five years and mired in land acquisition problems. In fact, the government had just stepped up its efforts on the land acquisition front, persuading farmers to part with 4,004 acres of land needed for the project.

The iron ore mines lease would have ensured that the steel major had the back-end in place before it actually gets down to building the project. The court, instead, directed the government to reconsider the claims of other applicants for the mines.

According to analysts, even after a prospecting licence is granted, it takes at least three to four years to start mining.

A division bench of the Orissa High Court comprising justice BP Das and justice BP Ray asked the state government to hear all the applications for the mines once again and take a fresh decision in four months, said the standing counsel for state steel & mines department Srikanta Nayak. According to him, ?The court has observed that the ?relative merits are insufficient? in deciding in favour of Posco India.?

A senior official in the state steel & mines department told FE: ?We are yet to get a copy of the court order.? He said the state government would take a decision whether to move the Supreme Court against the order.

If Posco India?s land acquisition efforts ran into protests soon after the MoU was signed on June 22, 2005, recommending the grant of prospecting licence for the mines by the state government was hotly protested by other applicants, 226 in all.

The state government had recommended the Centre to grant prospecting licence (PL) for Khandadhar mines in favour of Posco India. The state government picked up Posco?s application from among 226 applicants for the mining lease, invoking the provisions of Section 11(5) of the Mines and Minerals (Regulation & Development) Act 1957. The state government?s recommendation, however, was challenged by Geomin and other applicants.

Geomin Minerals told the high court that its claims were not considered properly by the state government before recommending Posco India.

?We are awaiting the details of the judgement,? said Posco India spokesperson Simanta Mohanty.

The state government had recommended the licence in December 2006, under which Posco India would get 6204.352 hectares of Khandadhar mines. The central sector miner Kudremukh Iron Ore Corporation (KIOCL) challenged the recommendation in court. KIOCL, which had carried out prospecting of the mines, claimed that it had the first right over the mines. The Centre, in July 2007, however, rejected KIOCL?s recommendation and directed the state government to grant the mine only after hearing all the 226 applicants for the mines. The state government again recommended the mines in favour of Posco India in January 2009. This time, the state government reduced the area by 50% to 3,000 hectares, excluding the area claimed by KIOCL.

Geomin, one of the early applicants, immediately challenged the recommendation in high court. It pointed out that the government had recommended Posco India without rejecting their claims. Then, on April 19, 2009, the state government rejected the claims of other applicants and filed an affidavit in high court to that effect.

Khandadhar mines promises a reserve of 300 million tonne of high grade iron ore. Besides KIOCL and Geomin Minerals, there were several other applicants including Essar Steel, Jindal Photo, Jindal Strips, SSL Enegrgy, MSP Metallics, Mesco Kalinga Steel, Adhunik Metalliks, Uttam Galva Steel, Bhusan Power & Steel.