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Posco suffers setback in Karnataka; SAIL makes alliance offer

'Posco project is in a limbo. They say they are considering it in their board. Since we have got more steel plants, we are also not pursuing,' state's industries minister Murugesh Nirani said.

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The Karnataka government today put Posco's proposed Rs 30,000 crore project in cold storage, even as the South Korean steel giant received a new offer for tie-up from state-owned SAIL.

"Posco project is in a limbo. They say they are considering it in their board. Since we have got more steel plants, we are also not pursuing," Karnataka Industries Minister Murugesh Nirani told reporters in Bangalore.

Posco, whose proposed Rs 54,000 crore project in Orissa has been idling since 2005 for want for land and clearances, signed an initial pact with Karnataka earlier this year for the six million tonne per annum plant.

Although its green field proposal received a setback in Karnataka, the company received a fresh offer for an alliance with SAIL.

"We (SAIL) are in talks with Posco to set up a downstream cold-rolled grain-oriented (CRGO) steel mill," Steel Secretary Atul Chaturvedi told reporters in New Delhi. The CRGO, a key steel input for manufacturers of transformers and large power generators, is mostly imported now.

State-owned company SAIL is already working on modalities of jointly setting up a steel plant in Jharkhand, and a steel mill in Maharashtra, both entailing total investment of Rs15,000 crore. Chaturvedi did not elaborate on the size, investment and the location of the CRGO mill.

On the other hand, Karnataka government said Posco was insisting on mining lease, but the state government had a policy of granting it on first-come first-serve basis.

"The government has so far approved 40 iron and steel projects," Nirani said indicating that the government was not keen on persuading Posco to set up its shop in the state.

Some steel companies, which have agreed to set up plants, have said they would import iron ore if needed and some others have mining lease abroad, the minister said. Karnataka has capacity to support steel plants up to 45 million tonnes capacity currently, Nirani said.

Karnataka, which is rich in iron ore reserves exports about 50 million tonne of the mineral annually. "Our policy is to encourage value addition. The state has total capacity to produce 65 million tonnes of iron ore annually", Nirani said.

"We cannot give assurance on mining lease. We are not giving anything in writing in this regard", he said.

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