Posco should not export iron ore from Orissa plant: Govt

Posco should not export iron ore from Orissa plant: Govt

New Delhi: South Korean steelmaker Posco , which wants to build a $12 billion steel plant in Orissa, should not export raw materials, including iron ore, from the proposed project, Union environment minister Jairam Ramesh said on Monday.

Posco signed an agreement with the Orissa state government in 2005 and it was scheduled to begin production by the end of 2011. But protests, environmental worries and litigation over a related mining concession have delayed what is India’s biggest foreign direct investment.

India is the world’s third-largest supplier of iron ore with most of its exports landing in China.

The initial agreement between Posco and Orissa, which expired last year, allowed the company to swap low-grade iron ore from Orissa for an equal amount of high-grade blended imports for the steel plant in Orissa.

The two sides are expected to renew their memorandum of understanding, and Ramesh said he hoped that the new agreement would avoid allowing Posco to export any raw material meant for the Orissa mill.

“I would expect that (agreement) between the state and Posco would be negotiated in such a manner that exports of the raw material are completely avoided," Jairam Ramesh said in a statement clearing land acquisition for the project.

A senior executive of Posco India told Reuters that export of raw material from Orissa was never part of the agreement.

“There was initially a plan for a swap because of the iron ore’s quality issues. But now we have the technology to do it here, so there is no need for even swapping any material," the official said.

Ramesh gave the plant clearance in January on certain conditions, but the project faced another delay last month when the minister asked the state government to address concerns of villagers set to be displaced by the steel mill.

On Monday, Ramesh quashed those objections and gave permission to the state to begin acquiring land for the project which has come to be seen as a test of India’s business climate and its struggle to balance growth with environment protection.

India’s environment ministry has already scrapped or halted several industrial projects, including plans by London-listed Vedanta Resources Plc to mine bauxite in Orissa.

While Monday’s decision clears the way for the plant to be built, Posco does face a legal challenge from a local firm also seeking a mining concession.

That decision on the mining concession lies with the Supreme Court, but the litigation is unlikely to hold back the mill’s construction now the green nod has been given.