Jan. 17 (Bloomberg) -- Posco may soon start construction on a $12 billion steel complex in India first proposed in 2005 as Prime Minister Manmohan Singh speeds up the approval process for the nation’s biggest foreign investment.
An iron ore prospecting permit for South Korea’s biggest steelmaker is at an advanced stage of processing, Singh said after meeting President Park Geun Hye in New Delhi yesterday. India revalidated environment consent for the project in Odisha state last week, almost two years after the pollution watchdog suspended approvals in 2012.
“I conveyed to President Park our hope that this project will confirm that economic growth and environmental protection can go hand in hand,” Singh said in a statement after the meeting, adding that construction would start in a few weeks.
The Pohang-based steelmaker’s plant is about nine years behind schedule because of government delays and farmer opposition. Bureaucrats, unnerved by graft probes and a possible power shift in the general elections due by May, have delayed permits and blocked Singh’s effort to boost economic growth from a decade-low.
“India continues to remain a good market for Posco, despite capital costs going up in the past few years,” said A.S. Firoz, chief economist at the federal steel ministry. “Steel demand may improve significantly by the time Posco’s plant is ready for production. I don’t see any market risk for the project.”
The Indian rupee’s 29 percent decline against the dollar has inflated the cost of the project to 738 billion rupees ($12 billion) from 528 billion rupees in 2005, when Posco signed the agreement for the venture.
Park, who took office last year to become South Korea’s first female leader, is visiting India from Jan. 15 to Jan. 18. It’s the first visit by a South Korean leader to Asia’s third-biggest economy since 2010.
Despite yesterday’s statement, Posco needs to settle a lawsuit over the project in the National Green Tribunal, a ministry-backed environment watchdog, regarding breach of forest laws. The panel is expected to meet on Jan. 21 to discuss the case.
Posco’s plans to secure an iron ore prospecting permit got delayed by more than four years after the Odisha government’s recommendation to allot the Khandadhar mines was challenged in the court. The nation’s top court in May ordered the federal government to decide on Posco’s mine lease. The proposed site may have reserves of 300 million metric tons of the steelmaking raw material, according to estimates by the state government.
The steelmaker plans to build an annual 12 million metric ton factory in phases. The first stage of 8 million tons will be built on about 2,700 acres of land. The company has possession of more than 1,700 acres, Commerce Minister Anand Sharma said in an e-mailed statement Jan. 15.
Posco in July said it scrapped a separate plan to build a mill in the southern Indian state of Karnataka because of delays in getting mining rights and land. The company had signed an initial agreement for the 323 billion-rupee integrated mill project in June 2010.
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