Home / Companies / News /  $12 billion Odisha project: No end in sight for Posco’s woes

Mumbai: The $12 billion Odisha steel project of South Korea’s Posco, which was formalized in 2005, remains stuck because it still does not have all the regulatory approvals, said the company, highlighting the problems faced by infrastructure projects in India.

Posco has told the National Green Tribunal (NGT) that its Odisha project “cannot proceed" any further at this stage due to regulatory hurdles and that it was yet to receive land and forest clearance required for setting up the 12 million tonne per annum plant, the Press Trust of India reported on Sunday.

“The counsel appearing for the project proponent submits that (as) their environmental clearance is valid only up to 19 July 2017, they would not be able to do any work because the land has not been handed over to them and, therefore, the project cannot proceed any further," the PTI report said, citing a bench headed by NGT chairperson justice Swatanter Kumar.

Mint could not review the note immediately.

At this stage, the bench noted, “they (Posco) are unable to carry out the project", and if they plan, they will take advantage of the environmental clearance and complete the project, stated the PTI report.

The company also submitted that it has not been able to obtain forest and other clearances while its environmental clearance is valid until July 2017.

The submissions came during the hearing of a plea filed by environment activist Prafulla Samantray challenging the environment ministry’s environmental clearance to Posco.

The NGT was informed by the counsel for the ministry that the facts submitted by Posco were correct. “In view of the above, this application does not survive and is rendered infructuous. However, the project proponent is to inform the applicant and the tribunal, if they want to carry on their project on the strength of EC (environment clearance)."

“Then the applicant would have the right to revive this application before the tribunal," the bench said, posting the matter for hearing next on 9 May.

Despite efforts by the government to make it easier to do business, Posco’s Odisha project remains one of several stalled projects in India.

On 5 April, Mint reported the value of all stalled projects in the March quarter rose to 11.36 trillion from 10.79 trillion in the December quarter—the highest level since the Modi government took office in May 2014.

India moved up four spots in the global rankings for ease of doing business released by the World Bank in October 2015, acknowledging the efforts undertaken by the centre to make it easier for the entrepreneurs and companies to do business in the country.

India ranked 130 among 189 countries, an improvement of four places from its last year’s ranking of 134, according to the Doing Business Report 2016. The report takes into account data till June 2015 and is based on a new methodology adopted for compiling the ranks both this year and last year.

Posco’s $12 billion project was formalized on 22 June 2005 with the signing of a memorandum of understanding (MoU) with Odisha, but what was then India’s largest foreign direct investment (FDI)—a showpiece to attract more foreign investors—is now an example of how things can turn sour in India’s bureaucratic set-up.

In the past 10 years, social, political, environmental and regulatory hurdles have bogged down Posco and forced it to downsize the Odisha plant to 8 million tonnes using about half of the 4,004 acres promised earlier; yet, land for the plant is still elusive. “However, the project could not make any substantial progress for the last 10 years due to the oppositions from some civil groups and local residents together with legal and administrative tangles. In particular, for the recent two years, the project has hardly seen any progress," Posco India said in a note posted on its website.

In June 2010, Posco made a second attempt to set up a steel making facility in India through an MoU signed with the Karnataka government to set up a 6 million tonne steel plant.

The South Korean steel maker withdrew from this project in July 2013 citing delays and land-related issues.

The firm sells about 2 mt of steel to India and has made massive investments to set up processing centres in the industrial hubs of Pune, Gurgaon and Chennai where its steel is cut and finished as per the clients’ needs. It naturally is keen to see a backward integration.

Posco continues to remain interested in India’s steel market. In the last one year, it has agreed to invest in a hot-rolled coil product facility with Uttam Galva Metallics Ltd and another 3 mt steel plant with Uttam Steel and Power Ltd.

India’s infrastructure projects would require 200 mt of steel by 2020, double the current levels.

The World Steel Association pegs global steel demand will grow at 0.7% in 2016, and India upto March 2016 has maintained a more than 4% growth in its steel consumption.

Posco has been tenacious also because of loyal clients that need high-grade steel, including those from its home country such as Hyundai Motor Co., Samsung Electronics Co. Ltd, LG Electronics Inc. and the Daewoo group that have manufacturing bases in India.

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