KOLKATA (miningweekly.com) - South Korean steel major Posco might be packing up its $12-billion steel mill project in India; however, the provincial government of Odisha is making a last ditch effort to prevent it, offering the Korean company raw iron-ore material.

The provincial government had been in frantic communications with the federal government over the past week, pushing for iron-ore linkages to the Posco steel project from government-controlled mining companies like Odisha Mining Corporation (OMC) or even the formation of a new joint venture (JV) between OMC and Posco, a senior government official said.

Although there had not been any official statement from Posco regarding the abandonment of its steel project slated for construction at the port town of Paradip, local government authorities have been unnerved by the company’s decision to vacate the premises which housed its India office, taking it as a clear indication that Posco was finally giving up after a decade-long wait to secure assured raw material supplies.

OMC, owned and managed by the Odisha government, currently has 11 iron-ore mining leases across the province accounting for production of 30-million tonnes a year. This included the iron-ore reserves of Malangtoli.

Over the past few years, OMC scrapped a JV agreement for the development of Malangtoli with major Rio Tinto and Sesa, and the current thinking of the local government was to either offer raw material from this reserve to Posco, or even, if  the Korean company was willing, to form an OMC-Posco JV and thereby salvage the stalled steel project, the official said.

For the record, ten years ago, Posco signed an agreement with the Odisha government to construct a 10-million-tonne-a-year steel project at Paradip subject to the former allocating a captive iron-ore reserve to the steel producer. However, not only did a raw material linkage not materialise, the Korean major was also unable to get the entire amount of land at Paradip required for the project.

Earlier this year, under the new Mines, Mineral Development and Regulation Act 2015, an auction route was made mandatory for the allocation of all mineral resources.

Although Posco had not made it clear whether it would be willing to participate in the auctions to secure raw material sources, an Odisha government official pointed out that Posco had committed to its investment, the largest foreign direct investment in India, based on government assurance of raw material, and exemptions from new legislation could be considered by the federal government to honour that commitment.

He, however, conceded that while the Odisha government was pushing all it could and even sending fresh communication with new mining proposals to the federal government, the "ball is entirely in court of the Mines Ministry and Prime Minister’s Office to see that Posco does not throw in the towel".