POSCO's $12 Billion Indian Steel Project Given Go Ahead--With 60 Conditions Attached

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources--India's largest direct foreign investment deal since market reforms were introduced in 1991 has finally been granted approval and cleared to proceed by the Indian government. POSCO (NYSE:PKX) (Pohang, South Korea) is now working toward renewing the expired agreement with the state government of Orissa to build the $12 billion steel mill that has been stalled by various regulatory, environmental and social problems since 2005.

The granting of approval and land allocation has been observed with keen interest by heavy industrial project developers, miners, environmentalists and political groups in India and globally, as many projects are under review throughout the country for the terms of land use and their social impacts. Key coal mining projects are under scrutiny, which is stalling the finalization of power projects.

The final approval means that 1,253 acres of forest is being allocated to POSCO. In January, India's Environment Minister Jairam Ramesh put conditions on the land grant, which included ensuring the rights of tribal communities and developing compensatory forestation. The minister said that POSCO would also bear the cost of regeneration of an equivalent amount of open, degraded land in a district to be determined and indicated by the state government.

The ministry had requested the Orissa state government to give categorical assurances that no traditional forest dwellers are dependent on or cultivating land in the project area. The anti-POSCO group Samiti claims that there is evidence that some forest dwellers are on the site near the port of Paradip in the Jagatsinghpur district and will be displaced. Local forest dwellers and farmers continue to oppose the project.

In all, there are 60 new conditions imposed on the project, including one that seeks to prevent POSCO from exporting any surplus raw material feeds, including iron ore. The Orissa state government anticipates that the 12 million-ton-per-year steel project will create 50,000 jobs.

For background on the relations between the POSCO project and the Indian government see February 2, 2011, article - POSCO Project Decision Boosts India's 2012 Steel, as Global Industry Regains Momentum and November 5, 2010, article - POSCO Criticizes Indian Environment Ministry's Expert Committee.

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