POSCO has virtually ended its project to build a steel mill in eastern India as it seeks to return the plant site it borrowed from the Indian government.
According to POSCO India officials Sunday, the world's fourth-largest steelmaker is willing to give back the site to the Odisha state government as the costs of keeping it have been snowballing while the scheme has remained at a virtual standstill for more than a decade.
POSCO's India unit recently sent a letter to the state government, expressing its intent to return the land after it was asked to pay taxes and other expenses amounting to more than $10 million, according to a company official.
On Saturday, Industries Minister Debi Prasad Mishra of the Odisha government confirmed receiving the letter from the Korean steelmaker. The minister told local media outlets POSCO India is not interested in keeping the plant site because doing so incurs costs. The state government has not yet responded to POSCO's inquiry.
Giving up the land essential for building a steel mill means POSCO has finally decided to abandon the Odisha project, which has been delayed for 12 years.
However, POSCO officials still argue the company has not entirely deserted the Odisha project.
"The site has not been used for a long time so we figured it would be better used for other purposes until we resume the project," a company official said. "This doesn't mean we have completely given up. When the conditions are right, we will definitely restart the project."
In 2005, POSCO signed a contract with the Odisha state government to spend $12 billion to construct a 4-million-ton capacity steel mill there. At the time, Odisha was known as Orissa, changing names in 2011.
Under the agreement, POSCO secured rights to develop iron ore mines near the site in which it planned to build the plant. But it hasn't been able to even break ground due to opposition from environmentalist groups and residents. India's bureaucratic red tape is also said to have stalled the Odisha project.
Against this backdrop, POSCO has decided to put the plan on hold. Instead of creating a large steel mill, the steelmaker has been building more processing facilities to produce automotive steel plates and other high value-added steel products.
POSCO CEO Kwon Oh-joon has said it has taken too much time and money to build a large-scale steel mill with furnaces in eastern India, adding that the company will set up more lucrative steel processing plants in the South Asian nation.
POSCO currently operates three processing plants in western India, producing automotive and electrical steel sheets.
In 2015, POSCO opened its third plant in Maharashtra Province, about 120 kilometers from Mumbai. The facility is capable of producing 1.8 million tons of automotive steel plates annually for General Motors and other global carmakers operating factories nearby.
In 2012, the company opened its first Indian plant capable of producing 450,000 tons of galvanized steel plates annually, and a second with an annual capacity of 300,000 tons of electrical steel sheets in 2013. Both plants are located in Maharashtra Province.
The steelmaker brings hot-rolled steel sheets from its Korean and Indonesian plants to its processing factories in India, which churn out what carmakers and other manufacturers need.