By Kang Seung-woo
POSCO’s plan to build a $12 billion steel plant in India faces the biggest hurdle yet ― the subcontinent’s wayward treatment of foreign investors.
In two weeks, the central Indian government will decide whether or not to let the construction plan go ahead. POSCO officials said that they will consider what action, including legal, will be taken, once the decision is made.
According to POSCO officials and the Indian media, the Forest Advisory Committee (FAC), an ad hoc panel, commissioned to look into POSCO’s future steel plant in Orissa, India has recommended that Environment Minister Jairam Ramesh should nix it.
“The project is likely to be rejected as the FAC found violations of the Forest Rights Act by the company. It has recommended a cancellation of the FRA clearance,” a senior ministry official was quoted as telling local media.
FRA governs forest land acquisition and indigenous people’s rights, stipulating among other things that the indigenous people’s consent is necessary to purchase the land.
POSCO acquired permission from the Indian government for the lot in December 2009, four years after it had signed a memorandum of understanding (MOU) with the state government.
The Indian authorities approved the POSCO deal on the basis of a consensus in 1985 that the area where the plant was to be set up had no indigenous people. But now, they say it appears that there are indeed some indigenous people living there, thus their consent is required.
POSCO’s planned plant will have an annual capacity of 12 million tons in Orissa located on the east coast of India and is projected to cost $12 billion, hailed as the single biggest foreign direct investment case since the pertinent Indian law was revised in 1991.
However, the welcome turned out to be short-lived, as the construction has been delayed due to ongoing protests from villagers who are concerned about losing their livelihood and property, and the Indian government ordered the provincial authorities to temporarily stop all work related to the project in August.
At that time, the environment minister said in parliament that the state government did not complete the process of identifying the land dwellers and there is evidence of more residents in the area who are dependent on the forest for their sustenance.
In addition, the Orissa High Court ruled in July that the state government should reconsider its recommendation to provide a prospecting license to POSCO for a mining concession in the region.
POSCO requires 4,000 acres for the steel plant site and 2,900 acres are forested land.
Unsatisfied with the order, Orissa state chief minister Naveen Patnaik appealed to the central government to revoke the order by the environment ministry, saying the decision might damage the influx of investment to the third-largest economy in Asia.
The fate of the project is likely to be finalized in the near future, as the environment minister said that he will make a final decision shortly.
“The decision will be made within a couple of weeks,” Ramesh told reporters last week.
He also said that the proposal by the FAC on POSCO will be under review from a forest point of view, an environment point of view and a Costal Regulation Zone (CRZ) point of view.
“I can’t say anything as to what the end result of this review will be or when this review will come to an end. Obviously, it is not going to take much,” he added.
Meanwhile, despite unfavorable news from India, POSCO is poised to see how the situation develops and will wait for the final nod from the central government.
“Those reports are advisory in nature and they are not mandatory,” a POSCO official told The Korea Times. “The final decision will come from the Indian government, so we are awaiting approval.”