Govt mulls 'Korea Plus' even as Posco's $12-bn steel plant hangs in air

29 May 2015

Posco may shelve 8 mtpa plant as it will now have to take part in auction for securing the Khandadhar mines for running the plant

The government is planning to set up ‘Korea Plus’ to attract and fast-track Korean investments into the country, even as the single largest foreign direct investment (FDI) project by Korean steel giant Posco in Odisha got mired into further complications. So much so that Posco may even shelve its $12 billion, 8-million-tonne-per-annum (mtpa) steel plant in Odisha, hanging in balance since 2005.

During his recent visit to Korea earlier this month, Prime Minister Narendra Modi had a closed-door meeting with Posco CEO Kwon Oh-Joon. According to the ministry of external affairs (MEA) officials, the Odisha project was not even raised by its chief. Sources said it was a clear signal by the company that it is planning to exit the project.

This is because under the amended Minerals Development and Regulation (Amendment) Act, 2015, or the MMDR Act, the Korean steel manufacturer will now have to participate in auctioning for securing the Khandadhar mines in Sundargarh district of Odisha for running the proposed steel plant.

Although the state government is ready to extend all help possible to ensure that the project sees light of the day, the Centre has played killjoy. The state government has even gone to the extent of assuring long-term supply linkage with the Odisha Mining Corporation (OMC). But the Centre is insistent that as per the new Act, it cannot give concessional rights to the Korean firm.

“If they (Posco) want a mineral concession in their name they would have to go for auctioning. A mineral concession of any type cannot be given to any company without the auctioning route,” mining secretary Anup K. Pujari told Business Standard.

Pujari also said since the company does not have a mining lease but only a prospecting licence, it will not be eligible for a preferential allotment of the mines.

An MEA official, however, played down the issue. “Posco’s Odisha project is not an issue with Korea any more. The Posco board will decide whether they bid for the mining rights as per the new law on their own or with another company. Environmental and land issues are over. So, the matter was not raised,” said the official, who refused to be named.

However, during the meeting, Modi was learnt to have discussed the issue of setting up ‘Korea Plus’ similar to that of ‘Japan Plus’. This exclusive investment channel will be set up under the Department of Industrial Policy and Promotion (DIPP) under the ministry of commerce and industry, which is the nodal department for administering FDI-related issues.

In 2005, the state government was able to lure the firm into investing there, as it was promised the crucial iron ore linkage for the project, which has now been watered down by the Modi government, as the company does not possess a mining lease. According to the original memorandum of understanding that was signed between Posco and the Odisha state government, the plan was to set up 12 mtpa steel plant, which it had to later scale down due to land and environmental issues that are now over.

The matter has also assumed political overtones with the Bharatiya Janata Party pointing fingers at the intent of Odisha Chief Minister Naveen Patnaik-led Biju Janata Dal in kick-starting the project.