Posco, SAIL in talks for setting up a steel plant: Government

21 April 2015

Talks are on between South Korean steel major Posco and state-run domestic giant SAIL to set up an integrated steel plant, the government today said.

"SAIL and Posco recently discussed possible collaboration opportunities including setting up of an integrated steel plant," Minister of Steel and Mines Narendra Singh Tomar told Lok Sabha in a written reply.

"The discussions are at a very preliminary stage," he added.

On Posco's USD 12 billion Odisha project, considered the largest FDI in India, Tomar in his reply said, "The Memorandum of Understanding (MoU) of Posco, for setting up of a mega steel plant at Jagatsinghpur in Odisha has not yet been renewed by the State Government."

The steel maker's proposed project in Odisha has been stalled for about a decade on account of regulatory hurdles, including delays in land acquisition.

With this project for producing 12 million tonne per annum (MTPA) steel stalled for long, Posco has been exploring other investment opportunities in India.

Sources said that Posco and SAIL are in talks to jointly set up a 3 million tonnes integrated plant in Jharkhand, after their initial talks could not materialise.

The world's fourth largest steel firm's CEO Kwon Oh-Joon, India CMD Gee Woong Sung and Korean Ambassador Joon-Gyu Lee had met Prime Minister Narendra Modi in January and are believed to have discussed new investment plans.

Earlier, negotiations between SAIL and Posco for steel plant at Bokaro had failed on the ownership issue. Posco was demanding a majority stake which SAIL had refused. As a result a pact between them for the project did not materialise.

Posco had entered into a pact with Odisha government on June 22, 2005 for setting up the plant.

Besides these delays, in a blow to the company, earlier this year the Centre said Posco would be have to participate in auction to procure iron ore mines to feed its facility instead of direct allotment assured earlier.

Earlier, Tomar had said the firm, which was assured Khandadhar iron-ore mine via dispensation route, will have to participate in the auction process to get a mining lease.

Posco was previously promised the Khandadhar iron ore mine by the state government for its mega steel plant, but the actual allocation never happened due to delays in regulatory approvals.

Although the company has an MoU with the Odisha government for assured allocation of mining leases, the passage of the Mines Bill has mandated the allocation of all mines through auction route only and the agreement with the state government is not binding.