By Kang Seung-woo
Despite its rapid development, India poses a great challenge to foreign investors. One example is Korea’s largest steel maker POSCO’s attempt to build a multi-billion dollar plant there.
Once again, the project is caught in the wrangling among local villagers and the central government.
POSCO’s plan to build a steel mill in India has hit a snag once again, as the Indian government has ordered the provincial authorities to temporarily stop all work related to the $12 billion project.
The Ministry of Environment and Forests (MOEF) said Friday that the state government of Orissa had been directed to halt all the work including land acquisition on the steel maker’s project site because it violated the rights of forest dwellers.
The government agency formed a panel to investigate the project.
POSCO, which plans to build a steel plant with an annual capacity of 12 million tons in Orissa located on the east coast of India, signed a memorandum of understanding (MOU) with the state government in June 2005 and the deal was billed as India’s single-biggest overseas investment since the country launched market reforms in 1991.
However, the welcome turned out to be short-lived, as the construction has been delayed due to ongoing protests with villagers who are concerned about losing their livelihood and property.
India’s Environment Minister Jairam Ramesh was quoted as saying by Reuters on the same day in the parliament that the state government did not complete the process of identifying the land dwellers and there is evidence more residents in the area who are dependent on the forest for their sustenance.
With this decision, POSCO, the world’s third-largest steel maker, has joined ArcelorMittal on the delay list, as the top steel producer’s project is on hold now due to disputes.
The order came after a joint committee of the ministries for environment and tribal affairs has probed whether the project broke the forest rights act (FRA).
The FRA aimed at forest land and settlers’ rights stipulates that locals’ permission is required before acquiring forest land for a project.
The committee said that any work related to the project in this area is a violation of the FRA.
POSCO’s drive in the area also suffered a brutal blow to the project last month.
The Orissa High Court ruled that the state government should reconsider its recommendation to provide a prospecting license to POSCO for a mining concession in the region.
POSCO required 4,000 acres for the steel plant site and 2,900 acres are forested land.
The company received the final nod from the environment ministry last year on condition that the rights of dwellers in the area should be secured before land acquisition for the project.
Unsatisfied with the order, Orissa state chief minister Naveen Patnaik appealed to the central government to revoke the order by the environment ministry Saturday.
“When the proposed project has reached a decisive stage, it is unfortunate to ask for halting all activities in the name of review of implementation of the Forest Rights Act,” Patnaik said in a letter to Prime Minister Manmohan Singh.
Furthermore, he blamed the environment ministry for being led by the recommendation of a committee of non-governmental organizations (NGOs), saying the decision might damage the influx of investment to the third-largest economy in Asia.
Meanwhile, POSCO is waiting to see how the situation develops.
“According to the state government of Orissa, there were no traditional forest dwellers on state land, which will be the plant site, when it conducted a survey in 1985, so we expect this issue to be settled smoothly,” a POSCO official told The Korea Times.
“The central government as well as the Orissa state government is in favor of the project, and the order means that the government directed a reexamination, not a halt to the project.”