Will revival of the delayed and jinxed Posco project change the political dynamics between the BjP-led NDA government at the Centre and Biju Janata Dal, its estranged partner in Odisha, which is led by chief minister Naveen Patnaik? Prime Minister Narendra Modi’s decision to call a meeting of Central and state government officials recently to discuss the possibility of reviving the $12-billion Posco steel plant project has led to speculation that there may be more to the Centre’s plans than meets the eye. Political sources are linking it to the government’s quest to rustle up the numbers required in the Rajya Sabha, where it is short of majority, to push through key legislations, including the GST Bill.
Indeed, this move also brings both the BjP-led Centre and the BJD- led Odisha government, which were once allies in the state, together for a common cause. This development not only looks like an effort to revive the project, but also to explore future cooperation between both the political parties in the near future, especially in Parliament. Simultaneously, the Centre can claim political credit, if the Posco project takes off, as it is the country’s first Greenfield project that has remained on paper since 2005. The PMO’s intervention comes against the backdrop of the steel major temporarily suspending
plans to set up an integrated steel plant and indicating that it may scrap the mega-project altogether.
Once touted by the UPA government as the largest FDI in India, the plant was to produce 12 million tonnes per annum (mtpa) steel in Jagatsinghpur district, Odisha, but has been stalled for about a decade now due to various regulatory hurdles, including delays in land acquisition and mining leases. Withdrawal by Posco now could dent Modi’s Make in India manufacturing push. The fresh effort to get the project going is being made, despite the Centre’s clear stand that the South Korean company will have to bid for the iron ore mining lease, as per the new Mines & Minerals Development & Regulation Amendment Act 2015, which entails auction of mining leases. The mines in question are located at Khandadhar in Sunder- garh district, from where the Kalinga Commercial Corporation Limited already extracts iron ore and ships it to China. Odisha Mineral Corporation also runs its operations there. Odisha government had planned to lease out 2,500 hectares to Posco but this is now held up.
India plans to auction 20 iron ore mines in its first such sale ever. The mine sales will bring India closer to its target of tripling its steel capacity to 300 mtpa by 2025 and relying less on ore imports. Most of the
mines are in the midst of carrying our pre-auction activities. Auctions are expected to begin by November. Posco, on the other hand, has been seeking the Khandadhar mining lease as a prerequisite to start the project. The mine will fulfil its raw material requirements. Posco will need 13 million tonnes of iron ore a year to feed the 8-million-tonne steel plant it plans to set up in the first phase. Though the Odisha government had given Posco the mining lease, the decision was challenged in the state high court, which had scrapped the
Despite the Supreme Court having set aside the high court order in May 2013, the long-winding correspondence between the Union mines ministry and the Odisha government delayed the proceedings further and, meanwhile, the NDA government had got the MMDR Amendment Act 2015, which entails auction of mining leases, cleared in Parliament. Since then, Union mines minister Narendra Singh Tomar has made it quite clear on several occasions that under the provisions of the MMDR Amendment Act, Posco just like other entities will have to bid for the Khandadhar iron ore reserves.
However, the meeting at the PMO indicated that the Centre is looking for a via media. Till now, Odisha had offered Posco a long-term iron ore linkage through Odisha Mining Corporation. But it may now ask Posco to enter into a joint venture with a public sector steel company, such as Steel Authority of India (SAIL), for the project. In that case, an iron ore mine can be reserved for the project as the MMDR Act permits state governments to reserve a certain area for an interested PSU. Posco had signed an agreement with SAIL in 2011 for setting up a 3-million tonne steel plant in Bokaro, but it did not materialise because both sides wanted majority stake in the venture. However, Posco so far has remained non-committal, maintaining that it wants to see the details first.
♦ RAKESH JOSHI [email protected]