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Centre government's preference to Posco's Odisha project worries local players

Tuesday, 8 April 2014 - 10:00am IST | Place: Mumbai | Agency: dna

The central government's recent move directing the Odisha state government to expedite issuance of mining approvals to the South Korean steel major Posco is seen by many domestic players as unfair as several of them are still waiting to attain iron ore mines.

After the meeting of inter-ministerial group last month that monitors the implementation of mega steel projects in the country, the ministry of external affairs (MEA) last week asked Odisha state government to send all required documents to mines ministry in order to grant mining licence to Posco.

Earlier this month, the South Korean company had written to the Prime Minister Manmohan Singh-led Cabinet Committee on Investment (CCI) of putting construction work on hold at the plant site due to Centre's failure to grant critical approvals, especially a prospecting licence that it needs to start exploring the mine allocated to it.

Posco's proposed Rs 52,000-crore investment in a 12-million tonne steel project at Jagatsinghpur has been in limbo for the past eight years due to regulatory hurdles, delays in land acquisition and issue of mining leases.

Many local steelmakers that do not have captive iron ore mines called the government's move of pushing Posco's cause as partial and preferential. "Its extremely unfair to local steel producers. Despite signing two MoUs with the Karnataka state government for our 3 million tonne (MT) steel plant, we have not got any iron ore mines, land or water. They should allot iron ore mines first to local producers. Many have applied for licenses even before Posco," RK Goyal from Kalyani Steels told dna.

Other local steelmakers, on condition of anonymity, argued that even before Posco has made any investment they are getting mining leases while the local producers are running their existing plants at less than 70% capacities in absence of raw material security.

AMLs (applied mining leases) have been signed across the country but there are no physical sanctions being provided and moreover, the strategic planning of these mills (or steel units) has gone haywire. The expansion plans of various domestic steel mills are hanging amidst uncertainty and now steel majors are even looking to secure raw material assets abroad.

C P Baid, deputy managing director of Delhi based Monnet Ispat and Energy Ltd said that each and every investor whether foreign or local must be given a similar treatment. "Government needs to meet all of its commitments. If they are resolving Posco's issue, it would be expected that they will resolve the plight of domestic steelmakers also," he said. Baid added that there was an urgent need for clarity and level playing field.

Gautam Chakraborty, a metal analyst with Emkay Global Financial Services said that it would not be right to say that Posco is getting preference over local producers as they have suffered a lot since they first announced the project 10 years back. He believes that post South Korean President Park Geun-hye's visit to India in March, things seems to have turned in favour of the steel company.

Due to absence of raw material security and several procedural delays last year, India lost two big ticket FDI in steel sector. While Posco dropped its plans to set up 6 MT Karnataka steel plant, Arcellor Mittal chose not to go ahead with its 12 MT in Odisha.

Whether or not government is giving preference to Posco, one things is for sure if the government does not come up with faster and efficient remedy for providing iron ore to the domestic steel mills, India's dream of 200 MT of steel production by 2020, would be left paralyzed at around 150-160 MT.

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