Posco’s $12 Billion Indian Plant in Doubt After Panel Report

Posco’s proposed $12 billion steel plant in India is in doubt after a government panel recommended scrapping environment clearances given to the world’s third largest steelmaker.

Three of the four members of the panel suggested that approvals should be canceled because of “flaws in the studies, and shortcomings in the clearances granted” to the project in the eastern state of Orissa, Environment Minister Jairam Ramesh told reporters yesterday in New Delhi. A separate report by Meena Gupta, the head of the panel, asked for conditions to be added to the existing clearances, he said.

Posco’s project, billed as the single-biggest investment by a foreign company in India, has been delayed since 2005 because of opposition from farmers unwilling to give up their land. In August, the ministry rejected a proposal by Vedanta Resources Plc, owned by billionaire Anil Agarwal, to mine bauxite at Niyamgiri hills in the same state, hampering a planned $8 billion expansion.

“There is no fixed time frame for deciding the future of the Posco project,” Ramesh said. “There’s a fundamental difference between the Posco and the Vedanta projects.”

Opposition from farmers has helped stall $80 billion in planned spending by companies including Posco and ArcelorMittal on steel mills in three Indian states that hold more than half of India’s reserves of iron ore, a key material to make steel. ArcelorMittal is the world’s largest producer, ahead of Baosteel Group Corp. and Posco, according to the World Steel Association.

Final Recommendation

Both reports by the committee recommended Posco make a comprehensive environmental impact assessment, Ramesh said. The environment ministry’s forest advisory committee will meet on Oct. 25 to review the reports before making a final recommendation, Ramesh said. The members have suggested stricter implementation of the provisions under the Forest Rights Act.

“Posco is still waiting for the final decision of India’s environment ministry,” Choi Doo Jin, a spokesman for Posco, said by phone today.

The Pohang, South Korea-based company rose 0.2 percent to 493,500 won at 9:36 a.m. in Seoul trading.

The resettlement and rehabilitation package being offered by Posco to farmers who will be displaced from their land is a “good one” and is superior to the terms laid down by the state government, Gupta said in her report posted on the ministry’s website. Still, the landless laborers will have limited benefits, she said.

India’s environment ministry had asked the state government of Orissa to halt land acquisitions from farmers occupying the site of Posco’s proposed plant, Choi Doo Jin, a spokesman for the Pohang-based mill said on Aug. 9. The order followed a non- government organization’s claim that more native residents are living in the forest land than the state reported, he said.

ArcelorMittal, the world’s largest steelmaker, faces delays for a $10 billion mill in Orissa and in Jharkhand state. Projects by Tata Steel Ltd., India’s biggest maker of the metal, are faring no better in the two states and in Chhattisgarh.

To contact the reporters on this story: Abhijit Roy Chowdhury in New Delhi at achowdhury11@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net.

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.