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South Korea’s Posco and Adani Group have agreed to jointly build a $5 billion integrated steel plant in Gujarat in the third attempt by the South Korean steel giant to have a significant manufacturing presence in India.

As part of an initial non-binding agreement between Posco and Adani, the environment-friendly steel mill would be built at Mundra in Gujarat, the home state of the billionaire Gautam Adani-led conglomerate.

Details such as the investment and manufacturing capacity of the new plant were not disclosed.

The alliance is a significant move for the diversified Adani Group, which has interests in logistics, ports, airports, mining, power generation and distribution, renewable energy, gas and infrastructure.

Adani has recently announced major investment plans as part of an ambitious plan to become the world’s top renewable energy company.

The group is also venturing into new-age businesses with plans for a super app and investing big in data centres.

Both Posco and Adani plan to further collaborate at the group level in other sectors such as renewable energy, hydrogen and logistics to respond to their global carbon reduction requirements, according to a joint statement.

They said they plan to tap renewable energy sources and green hydrogen, in line with their ESG (environmental, social and governance) commitments to sustainability and energy efficiency.

Both parties are also examining various options to cooperate and leverage the technical, financial and operational strengths of each company, according to the statement.

The companies have also signed an initial agreement with the Gujarat government for support and cooperation for the partnership.

Posco has had a chequered journey in India so far, with unsuccessful attempts of setting up mega steel projects in Odisha and Karnataka.

It had agreed in June 2005 to incorporate an Indian subsidiary and build a steel plant in Odisha, but the project didn’t materialize following protests, controversies and delays in land acquisition.

Similarly, in 2010, the company signed a pact with the Karnataka government but shelved the investment plans in 2013 amid a delay in the acquisition of land by the state government.

Posco currently has a 1.8 million tonne cold-rolled and galvanized steel mill in Maharashtra, India’s most advanced automotive steel supplier, and processing centres in Pune, Delhi, Chennai and Ahmedabad. The $709 million steel mill began operations in 2015.

India’s crude steel output, which stood at 87.07 million tonnes (mt) in April-December, is likely to reach 120 mt by FY22 end. In FY21, the production of crude steel and finished steel stood a 102.49 mt.

“Posco and Adani are able to come to great synergy in the steel and environment-friendly business with Posco’s state-of-the-art technology in steel making and Adani’s expertise in energy and infrastructure. I hope this cooperation will be a good and sustainable business cooperation model between India and South Korea," said Jeong-woo Choi, Posco’s chief executive.

Gautam Adani, chairman of the Adani Group, said, “the partnership will contribute to the growth of India’s manufacturing industry and the ‘Aatmanirbhar Bharat’ vision of the government of India. It will also help strengthen India’s standing in green businesses."

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