Posted on 25 Sep 2015
Odisha steel project: Posco needs to file fresh proposal
South Korean steel major Posco would have to
file a new proposal for setting up its proposed $12-billion steel
venture in Odisha if it wants to pursue the project.
The company was sounded about it at a recent meeting among officials of
the Central government, state government and Posco, convened at Delhi by
the cabinet secretary, to break the impasse over the project, hanging
fire for 10 years.
"Due to changed circumstances for raw material linkage, Posco has to
file a fresh proposal," a senior government official said. "Posco is yet
to respond to us on this."
The need for filing anew, according to sources, arises out of denial of
allotment of captive mines to the company on a preferential basis
following amendment to the Mines and Minerals Development and Regulation
(MMDR) Act. With Posco unwilling to take part in the auction process to
get hold of a captive mine in line with the provisions of the new Act,
there are two ways now to meet its raw material needs.
One is a possibility of a joint venture between Posco and state-owned
Odisha Mining Corporation (OMC) for operation of an iron ore mine to be
reserved for the state public sector undertaking. The second is a pact
between Posco and OMC for supply of raw material to the company from one
of the mines owned by the latter.
At the Delhi meeting, the Centre asked the Odisha government and Posco
to carry forward bilateral talks on the options, while making clear
there would be no exception for Posco on allotment of a captive mine.
The earlier proposal hinged on establishment of the project based on
allotment of a captive mine. With that possibility vanishing, the
company has to decide on what arrangement it wants to enter with OMC to
ensure raw material security if it wants to pursue the Odisha project,
sources said.
Posco had first signed a deal with the Odisha government in June 2005,
for setting up a 12 million tonne steel plant, in four modules of three
million tonnes each.
On expiry of the validity of the deal in 2010, the company had given a
new proposal for a tripartite agreement between the Odisha government,
Posco India and its Seoul-based parent company.
The draft proposal for the agreement contained a few changes from the
one signed earlier, mainly relating to revision of the capacity of each
module from three million to four million tonnes, with the first two
forming Phase-I and the third module pushed to a later stage, dropping
of an iron ore swapping clause, changes in the water sourcing plan,
focus on local employment, etc.
Though that proposal was given by Posco in 2011, it could not pass the
government's scrutiny till January, 2015, when promulgation of the new
MMDR ordinance made it infructuous.
Posco's Odisha project, billed as the single largest foreign direct
investment in the country, has been embroiled in protests and delays
over land acquisition, review of forest and environment clearances and
rows over allotment of captive mines for the past decade.
Though the state government has acquired 2,700 acres land to enable the
company set up Phase-I of eight million tonne steel capacity and forest
and environment clearances are in place, it is the denial of captive
mines on a preferential basis coupled with the present slump in the
steel market, which have made the project unattractive for the promoter
and pushed it into uncertainty.
