Odisha in damage control mode: Charting the twists and turns in Posco $12 bn project

Bhubaneswar - The Odisha government on Friday expressed optimism on the execution of the Rs 52,000 crore mega steel project by Posco ADR near Paradip and said it had not received any communication from the South Korean firm about its reported plan of putting the project on hold. “The state government has not received any communication regarding Posco’s plan of putting Odisha project on hold. We are optimistic about implementation of Posco’s 12 mtpa (million tonnes per annum) mega steel plant near Paradip,” Prafulla Kumar Mallick, Odisha’s steel and mines minister, has been quoted as saying in a PTI report. The Odisha government has made its stand clear on the Posco project, Mallick said, adding, the state continued to demand making special provision of supplying raw material to Posco plant considering it as an international commitment. “The state government had made recommendation in favour of Posco for getting Khandadhar iron ore reserve much before the new MMDR (mines and minerals development and regulation) act came into the force this year. Therefore, the company should be provided the raw material linkage as per the previous provisions of the MMDR act,” Mallick said. Asked whether the Posco’s decision to put its Odisha project on hold would not affect the ongoing industrialisation process in the state, Mallick said, “out of 49 MoUs, so far 32 have been executed. And we hope that the remaining projects will see the daylight soon”. Earlier a report in Bloomberg quoted company CEO Kwon Oh Joon as saying that the suspension will continue “until Indian Prime Minister Narendra Modi offers better deals”. Here is an explainer on why there is a mad scramble to save the project: [caption id=“attachment_2348262” align=“alignleft” width=“380”]  AFP[/caption] What is the project all about? The Odisha government signed a memorandum of understanding with South Korea’s Posco in 2005 to set up a 12 million tonnes per annum (mtpa) steel facility. As per the agreement, the project includes iron ore mine development over 30 years (total 600 million tonnes) at captive mines located in the Keonjhar and Sundergarh districts of Odisha and also development of related infrastructure like ports. The Posco project required 4,004 acres of land. The Odisha government has reportedly acquired 2,700 acres and handed over 1,700 acres to the steel giant. In all eight villages were to be directly impacted. It is the largest FDI commitment the country has received yet. Why is the project controversial? There are many reasons. First one is the protests from the betel vine farmers in the affected villages. Soon after the signing of the MoU villagers who were to be affected by the project started protesting against it. Posco Pratirodh Sangram Samiti was established by Sishir Mohapatra and fights for the rights of the tribals. The government has taken violent means to crush the protests against the project, resulting in deaths of villagers. The epicentre of the protests is Dhinkia village. In October 2013, a UN human rights panel asked the company to halt the work. “Construction of a mega-steel plant in Odisha in Eastern India should be halted immediately… The project reportedly threatens to displace over 22,000 people in the Jagatsinghpur district, and disrupt the livelihoods of many thousands more in the surrounding area,” the panel of experts said. Second issue is the environmental clearance. The project first got environmental clearance in 2007. On 30 March 2012, the National Green Tribunal suspended the clearance and directed the ministry of environment and forest to review the approval accorded earlier. An expert appraisal committee recommended that the clearance for the project could be revalidated until 2017. The critics of the project allege that the company does not have a valid MoU with the state government as the first pact got lapsed in 2010. Thrid issue is iron ore linkage. The state government in January 2009 had recommended 2,500 hectares of Khandadhar iron ore reserve in Sundergarh district for Posco. The arrangement did not take off and it had a lot of twists and turns. In 2010, the Odisha High Court cancelled it and then the Supreme Court upheld it but wanted the Union mines ministry to take a final call. In January 2014, the central government sought more information from the state government on its recommendation in favour of Posco. Now, with the new mining ordinance promulgated by the Centre in the after of the coal scam, it is imperative that all companies have to participate in an auction to get mining licence. If the company is to participate in a competitive bidding, the costs are sure to go up, which is why the company has suspended its work now. Fourth controversy was regarding the captive port. There is a view that the company should use the Paradip port, instead of setting up a captive port. According to this Business Standard article, state BJP leaders had voiced concerns about the iron ore arrangement recommended by the state government, the SEZ status accorded to the project and the captive port. Why is the suspension of the project critical? Because the chances of scrapping the project completely is now the highest. Also one cannot escape the irony that it is happening under the prime ministership of Modi, who projects himself to be a business-friendly politician. Moreover, what has hastened the decision to suspend the works is the mining ordinance promulgated by the government, which has been touted as one of the key reforms taken up by the government. If the project is indeed cancelled, it is likely to dent the government’s investor friendly image. It will also be a setback to Modi’s Make in India campaign. Meanwhile, for the fighting tribals, it will be a big victory. With inputs from agencies