Mumbai: Whether Posco stays or leaves, a strong likelihood is that there would be a steel plant in Odisha’s Jagatsinghpur.
Posco chief’s latest statement that the Indian plant project has been “tentatively postponed”—the poor latest quarter results showing a 76% fall in net profit, coupled with a decade-long wait to get the land for the plant—has once again led to speculation that Posco would announce a formal exit from Odisha.
If it really does so, isn’t there a chance that its Indian competitors will grab the land to build a steel plant anyway in Jagatsinghpur?
Since 2005, Indian companies have been raising steel capacity with a long-term perspective, knowing that India needs massive amount of steel to build its infrastructure across the country; the government’s target is 200 million tonnes (mt) of steel by 2020, while India’s capacity is now at 101mt.
It is quite likely that a company like JSW Steel that is on an expansion spree could grab Jagatsinghpur; its promoter Sajjan Jindal last year announced his intention to build a plant in Odisha. JSW’s stated target is to produce 40mt steel in the next decade, from 14.3mt now.
Secondly, over the last decade, there has been a socio-political change in Jagatsinghpur. For 10 years, the Communist Party of India reigned in the district and people feared upsetting the local CPI leaders. Now the new member of Parliament from the district, Biju Janata Dal’s Kulamani Samal, claims more number of people want a plant at the location.
“In Jagatsinghpur, about 60-70% people are in favour of the plant. Now who will take the land—whether it will be the Koreans or someone else …” Samal said in a recent interview with Mint, hinting that the state is keen for the project to get started, whoever the steel company may be.
Still, Posco is no quitter. Some analysts say it is possible the South Korean company will wait for the auction of the iron ore mines to see if it manages to get the most crucial part of their operations—raw material.
That could be a game-changer and have Posco re-dedicate its attentions to Odisha for the sake of its many clients in India—a 2mt market—and also to bring in its low-cost technology which can easily change the market in its favour.