KOLKATA (miningweekly.com) - South Korean steel major Posco is hoping to meet with Indian Prime Minister Narendra Modi for an intervention to secure iron-ore resources for its $12-billion steel plant project in India, hanging fire for over a decade.
A decision on the allocation of iron-ore linkage for the proposed steel plant would be key to whether Posco India would renew the memorandum of understanding (MoU) signed with the provincial government of Odisha in 2005.
The original MoU expired in June 2010, but a renewal would only be possible if Posco was assured allocation of iron-ore linkages for the plant, and not through participation in auction, as mandated by new legislation brought in by the Indian government, an official in Odisha government said.
The Odisha government was backing Posco’s bid for government allocation of raw material at the Khandahar iron-ore reserves on the grounds that the steel major had committed investments in 2005, based on assurances of allocation of iron-ore through the government dispensation route rather than through auction, he said.
Considering that Posco’s investment would be the single largest foreign direct investment in the country, changing rules for allocation of raw material resources with retrospective effect would send the wrong signal to foreign investors, the official said.
In the absence any firm commitment on raw material supplies, it was unlikely that Posco India would renew the MoU and recommit itself to the proposed investments when there were no matching commitments from the Indian government, he added.
A Posco India official said that the company had communicated with the Prime Minister’s Office, seeking a meeting, and was still optimistic that earlier commitments on providing iron-ore linkages for the proposed steel plant would be honoured.
Last month, soon after promulgation of the Mines, Minerals (Development and Regulation) Amendment Ordinance, which paved the way for auction of mineral resources, Mines and Steel Minister Narendra Singh Tomar said that Posco would have to put in bids for securing the Khandahar iron-ore reserves like any other investor or company as per the changed laws.
Posco’s India's investment plans have had a bumpy ride over the past decade during which it had to scrap its investment proposal for a six-million-tonne-a-year steel plant in the southern Indian province of Karnataka following hurdles in land acquisition and failure to secure raw materials linkage.
Even in case of the Odisha project, the steel major scaled down the project size to 8-million tonnes from 12-million tonnes a year as it was unable to get possession of the required land.
Earlier this month, Posco India deputy MD Ho Chan Ryu, who had been involved with the India projects in several stints since inception, was withdrawn from the Odisha project. However, there was no clarity as to whether the move was in any way an indication or the company’s commitments to Indian investments.