Paradip (Odisha): Almost exactly a decade after South Korea’s Pohang Steel Company (Posco) signed a memorandum of understanding with the Odisha (formerly Orissa) state government to put up an integrated steel complex in the eastern coastal Indian state at a cost of $12bn, the Korean steel giant looks all set to pull out of the project.
Posco is said to be making all efforts to recover the money it gave to government agencies for the purchase of land and railway connections, though company spokesman I G Lee is reported to have said that the company was “still on” and “waiting for further progress”.
Lee could not, however, explain away a letter sent by Posco earlier this month to Haridaspur Paradip Railway Co, seeking a refund of $4.4m paid by it in 2006 for a 10% stake in the rail infrastructure firm mandated to lay the tracks.
Originally slated to cost INR510bn ($12bn in 2005, but only $8.16bn at today’s exchange rates), the project with a capacity of 12m tonnes of steel per annum was to have come up in Jagatsinghpur district of Odisha, and had been billed as the biggest foreign direct investment deal in Indian history.
Unfortunately, the project simply failed to take off. It was repeatedly stalled by local disputes and lease issues. Local farmers stoutly resisted the coming up of a steel mill in their midst, and the company also failed to secure the requisite iron ore mining leases.
The steel maker was able to overcome local opposition and get the state to acquire about 2,700 acres of land for the first phase. Securing supplies of iron ore, a key steelmaking raw material, proved tougher. The federal government in January decided it would auction all mineral resources, including iron ore and limestone. It meant that Posco would now have to bid for securing iron ore blocks, which would increase costs.
Land acquisition delays had also forced Posco to scrap a plan to build a steel plant in the southern Indian state of Karnataka in July 2013. The same month, ArcelorMittal, the world’s biggest steel producer, pulled out of its steel-making Odisha project, citing delays in getting permits.