New Delhi: The majority view of a high-level government panel has, claiming violations of forest laws, recommended cancellation of the environment clearances for Posco’s 16-million-tonne steel project located in coastal Orissa.

If the environment ministry goes along with the panel’s view, then it could potentially jeopardize the project that entails a foreign direct investment (FDI) of $12 billion (53,160 crore), the single largest in the country.

Multiple pressures: A file photo of Posco Pratirodh Sangram Samiti activists protesting against the Posco steel plant in Balitutha, Orissa. Hindustan Times

“The matter is now with the environment ministry and we will wait for their decision," said Vikash Sharan, vice-president (corporate affairs), Posco.

Three out of a four-member committee set up by the environment ministry recommended on Monday the ministry cancel environment clearances as the state government had violated implementation of the Forest Rights Act. Five years after Posco and Orissa government signed a deal, the committee wanted the entire environmental clearance exercise to be done afresh.

Monday’s report came at a time when FDI into India has begun to shrink. In the April-July period, FDI shrank 28% on-year to record $7.59 billion.

The head of the committee, Meena Gupta, who disagreed with the other three members, recommended extra conditions could be imposed to mitigate the environmental impact of the project, but said that assessing compliance at this moment was premature as Posco has not yet been given the land to start construction.

The Posco Pratirodh Sangram Samiti, the activist group opposing the project, welcomed the majority view of the panel and maintained that it was “completely illegal". “We were expecting Mrs Gupta to have a different point of view as the project got clearance in 2007 when she was the secretary at the environment ministry," Prashant Paikray, spokesperson for the group, said.

Mint could not reach Gupta for a comment.

“The tussle is between the state and the Central government on procedural issues. We are getting impacted due to this, but what can we do?" a Posco official based in Orissa said on condition of anonymity.

The four-member committee was formed by the environment ministry on 28 July to check the state of implementation of forest laws around the proposed project site. In December 2009, the environment ministry had cleared the project’s forest clearance with an extra condition that rights of forest dwellers should be settled before the project started.

Posco requires 4,004 acres of land. Out of that, 3,568 acres belong to the state government, of which 2,954 acres is forest land. The majority view of the panel said that the environmental impact study was not carried out for the entire 16-million-tonne steel project, which includes a port and a township.

Posco planned to develop the project in three phases, with the first phase of four million tonnes to start running by end-2011. The rest of the project was to be ready by 2016.

Unlike the case of Vedanta Aluminium Ltd, where the environment ministry rejected bauxite mining rights in Orissa, the Posco project has not yet started. The construction of the Vedanta project was almost complete.

PTI contributed to this story.