Posco’s $12 billion Orissa project on hold

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Posco, South Korea’s biggest steelmaker, has put on hold plans to build a steel plant in India after land acquisition and farmer protests stalled the $12-billion project for a decade.

The project in India’s eastern state of Odisha has been “tentatively postponed,” CEO Kwon Oh Joon said on Wednesday. Until Indian Prime Minister Narendra Modi “offers better deals, we won’t resume and for now we will head to the west and do more downstream work”, he said, referring to a plant the company operates in the state of Maharashtra.

Posco’s 12-million ton-a-year Odisha project, which was the nation’s biggest foreign investment, failed to take off since 2005 because of opposition from local farmers and the failure to secure iron ore mining leases, initially promised for free to the company.

The government in January decided it would auction all mineral resources, including iron ore and limestone. That meant Posco had to bid for securing iron ore blocks, which increased costs. The steelmaker was eventually able to overcome local opposition and get the state to acquire about 2,700 acres (1,093 hectares) of land for the first phase in 2013.

In March this year, South Korea’s biggest steelmaker had tried to get back the money it gave to government agencies in Odisha to secure some of the land, and for railway connections, according to three people and company letters seen by Bloomberg. Six of 13 employees at Posco’s Indian unit overseeing the project also “voluntarily” resigned, spokesman I G Lee had said in a text message earlier.

In a letter sent to Haridaspur Paradip Railway Co, Posco India had sought a refund of Rs. 27.5 crore ($4.4 million) paid in 2006 for a 10 per cent stake in the rail infrastructure firm mandated to lay the tracks, according to two people.