Dream POSCO: Now a reality?

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Although POSCO signed MOU with Govt. of Odisha on 22nd June, 2005 to build 12 mtpa capacity steel plant with an investment of 52,813 cr. Rupees, there is little progress. POSCO recently got environmental clearance from the ministry of Environment and Forest. Government of Odisha will be able to handover land to POSCO. The recent visit of President of Korean Republic has accelerated the process and everything seems faster now. This is a good sign. The Rehabilitation and Peripheral Development Advisory Committee (RPDAC) has started recommending some productive steps to POSCO for smooth initiation of activities. It appears that POSCO dream will now bear the fruit.

India is currently the 5th largest steel producing nation in the world having around 180 nos. producers and with 72 million tons of production. Demand for Steel in India is rising because of rising economy and growth in infrastructure and automobiles. Govt. of India targets to increase the production capacity from 72 million tons in 2009-10 to 124 mt per annum by 2011-12. India accounts 7% of total steel produced globally while it accounts 5% of global steel consumption. Per capita steel consumption in India is 46kg only as against 198 kg of the world. This wide gap in relative steel consumption indicates that the potential ahead for India to raise its steel consumption is high.

Indian steel sector enjoys advantage of domestic availability of raw materials and cheap labour resulting cost advantages to domestic steel industries. Now Tata Steel is one of the lowest cost producers of steel in the world. The steel consumption has declined by 6.7% from 1202 million ton in 2008 to 1121 million ton, mostly due to reduced consumption in developed countries because of economic crisis. But Asian countries like China and India have stepped up their production by 3.6% over previous year. Asia’s production in 2009 bears 65% of world’s production against 58% in 2008. Odisha is having huge base of iron ore, manganese and chrome ore. Huge quantity of these ore is exported to other countries. Over exploration of mineral is an alarming threat to the mineral resources of the state. Despite of increase in export duty, reckless export and unrecorded exploration causes a serious concern.

Because of availability of raw material and good infrastructural facility, it is a matter of pleasure that investors are rushing to Odisha for setting up steel plants. Government of Odisha has signed memorandum of understanding with 49 number of industries (including six mega plants) with total proposed production capacity of more than 40 million tons per annum and an overall investment of Rs.1, 60,000 crore. Rich and quality iron ore of Odisha (56% iron context) has drawn the attention of global investors and the State Government has an ambitious plan for developing the State through rapid industrialization. But till today, the progress is discouraging. Odisha, a potential steel cluster, still remained as dream. Some of the major bottleneck is delay in getting permission from GOI for forest land, delay in land acquisition and resistance from local stakeholders for not leaving their land. Whether or not these steel plants will come up in near future is a big question mark.

POSCO (Pohang steel company), a South Korea based steel company, is one among six mega companies – which signed MOU with Govt. of Odisha on 22nd June, 2005 to build 12 mtpa capacity steel plant with an investment of 52,813 cr. Rupees. POSCO is the third largest steel producer of the world with a total production capacity of 30 million ton. POSCO entered into MoU with Govt. of Odisha to build 12mtpa capacity steel plant and develop mines and linked infrastructure over three phases by 2016. It had planned to set up the plant on the sea coast of Paradeep in Jagatsingpur district of Odisha and to produce 4 million ton during the period 2007-10 and to expand the capacity to 12mt during the period 2010-2016. Similarly Government of Odisha in their memorandum of understanding promised to give adequate land, water, power, attached minor port, iron ore mines, Special Economic Zone (SEC) recommendation and facilitate other assistance.

NCAER (National Council of Applied Economic Research) have made social cost benefit analysis of this mega project. The employment multiplier for iron ore is 0.35 and for steel it is 0.69man year of employment is created respectively. Therefore, in terms of both output and employment steel has a larger impact than iron ore only. It is estimated that for next thirty years, cumulative employment will be 8,72,637 jobs and cumulative production will be around Rs.298 billion.

It is imperative to mention here that the commission of POSCO plant will have a mega impact on the economy of the State. But the resistance of people, environmental problem and procedural hazards are to be addressed. Government of Odisha has to provide land to POSCO with least possible environmental and social disruption. However, POSCO recently got environmental clearance from the ministry of Environment and Forest, Government of India ending 8 years of wait for a project that would involve the largest ever FDI in India. But the National Green Tribunal has put a stay on POSCO project and Government of Odisha will be able to handover land to POSCO only after National Green Tribunal stay is vacated.

Odisha Government approves Khandadhar mines in favour of POSCO. Government of India did not given clearances for separate port for POSCO yet. Odisha Government will sign fresh tripartite agreement with POSCO as the agreement with later lapsed since last three years. The recent visit of President of Korean Republic has accelerated the process and everything seems faster now. This is a good sign. The Rehabilitation and Peripheral Development Advisory Committee (RPDAC) has started recommending some productive steps to POSCO for smooth initiation of activities. Let us hope for the best that POSCO will now bear the fruit.

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