Photo by: Reuters
KOLKATA (miningweekly.com) - South Korean steel producer Posco’s $10-billion Indian project, which has already been delayed by over a decade, was likely to suffer fresh setbacks following a tussle between the federal and provincial governments over the allocation of captive iron-ore reserves.
According to officials in the Mines Ministry, Posco, stung by the delay in securing a captive raw material source, had approached apex body, the Cabinet Committee on Investments, headed by Prime Minister Manmohan Singh, following which an inter-Ministerial group (IMG) had intervened seeking speedy clearances from the provincial government in the allocation of iron-ore reserves.
The federal government was extremely keen to kick-start the Posco project, as hindrances faced by the South Korean steel producers were putting strain on diplomatic relations between India and South Korea, the official said.
The provincial government had responded that it was facing problems in demarcating the area in Kandahar, in the eastern Indian province of Odisha, into areas where prospecting licences could be granted immediately and areas that would require several mandatory approvals before the granting of such a licence.
The Indian government has been keen to get the Posco project back on the rails before the national elections that were currently under way, but lack of coordination between the provincial and federal governments had it impossible, and any further progress would depend on the newly elected government, officials said.
The steel producer was clearly a victim of a procedural tussle between the provincial and federal governments, thereby delaying the largest foreign direct investment into the country. Posco proposed to construct a 10-million-tonne-a year steel plant at Paradeep, a port town in Odisha, officials said.
Based on the deliberations of the IMG held last month, the officials said that the crux of the problem was a lack of coordination between the Ministries of Mines at the provincial and federal levels.
Under the relevant legal provisions, the local government was expected to demarcate the iron-ore-bearing regions into ‘notified’ and ‘non-notified’, but the Odisha government had been delaying the process claiming it was facing problems at the local level, the officials said.
Government officials conceded that efforts to hasten the allocation of raw materials to Posco also stemmed from India’s eagerness to repair damaged diplomatic relations between India and South Korea following the Samsung case.
India’s Supreme Court, on March 31, had ordered Samsung Electronics chairperson Kee Kun-Hee to appear before a local court within six weeks in a legal case filed by a New Delhi-based JCE Consultants.
Apart from seeking the Indian government's help in securing information that would enable Samsung to strengthen its legal case, the South Korean government has also threatened to invoke the Bilateral Investment Promotion and Protection Agreement on the grounds of Korean investments in India being under threat.