By Kang Seung-woo
Although steel giant, POSCO, got the green light to build a manufacturing plant in Orissa, India, it may still see a few obstacles before the completion of the $22 billion project, industry sources say.
The Indian government finally gave POSCO, currently the world’s third-biggest steel maker, its blessing for the factory on the country’s eastern coast, Monday, after letting the Koreans wait for five years.
However, POSCO still needs approval from India’s Supreme Court to mine the region’s iron ore, the main raw material involved in the production of steel. There is also a possibility that locals, concerned about losing their property, may also disrupt POSCO’s land purchase process. Currently, the firm imports its iron ore mostly from Australia and Brazil.
POSCO signed a memorandum of understanding (MOU) with the provincial government of Orissa in 2005 over establishing the plant with a projected annual output of 12 million tons, and the company had planned to begin groundwork for the facility within this year.
However, an Indian company filed a lawsuit against the Orissa authorities in an attempt to reverse the permission given to POSCO to mine iron ore, and the regional high court ruled last year that the provincial government should reconsider its decision to recommend the mining license.
“(I expect) the mining issue to be decided by the first half of 2012,” Chairman Chung Joon-yang said in recent forum attended by chief executive officers (CEOs) of Korean companies.’’
“But before a Supreme Court ruling, we plan to complete land purchases and break ground for the plant as soon as its decision comes.”
Market watchers say that the acquisition of access to mine iron ore is key to the project.
“POSCO cleared the air, receiving the approval for the $12 billion project, but gaining access to iron ore is more important for the company to strike gold,” said a Seoul-based economist.
On earning the nod from the Orissa government, the company said it would soon resume land acquisition at the project site.
In August last year, India’s Ministry of Environment and Forests ordered the Orissa government to get POSCO to stop all work including land acquisition for the steel maker’s project site because it infringed on the rights of forest dwellers by violating the Forest Rights Act, which stipulates that locals’ permission is required before acquiring forest land for a project.
POSCO expects land acquisition not to be troublesome anymore thanks to the central government’s approval.
“We still need to continue to purchase land for the site, but it will gain momentum, helped by the government’s support,” said a POSCO official.
POSCO’s deal with Orissa is the India’s single-biggest overseas investment since the country launched market reforms in 1991.
Meanwhile, POSCO announced Tuesday that it has decided to build a plant for non-oriented electrical sheet in India.
This steel with uniform magnetic characteristics in rolling and in other directions is widely used in the iron core materials or rotary machines from large transformers to small electric precision motors.