It has been 10 years since the MoU was signed, but the steel plant still hasn't taken off. Let's see what has changed since the MoU was first signed.
South Korean steel giant Posco has put on hold its $12 billion steel project in Odisha due to delays in various regulatory approvals.
"We are tentatively suspending the Odisha (India) project due to lack of any progress," Posco Chairman and CEO Kwon Oh Joon said.
"Business conditions at home and abroad have changed due to drop in global steel demand, growing deficit of subsidiaries, which have led us to come to a conclusion that we must step up our reform efforts," he said at an investor event in Seoul yesterday.
The steel major's India spokesperson said however that it is not quitting Odisha, even as its over $12 billion project has been hanging fire for almost a decade.
"That is not the fact. Due to no progress in the project area, much of office space was lying vacant in Odisha. It was decided to renovate the office space to a smaller area," a Posco spokesperson told PTI on being asked whether there are plans to exit 12 million tonne (MT) Odisha project.
Posco has been facing problems regarding its mega project in Odisha on account of delays in raw material security, land acquisition as well as other clearances.
The company is reducing its unused office space and other expenditure that can be stopped as part of a massive global cost restructuring programme, said a person in the know of developments.
Posco has announced the restructuring programme, which involves reducing "30% of the overseas business within the Group".
This will involve "early turnaround of newly run overseas business" as well as "dispose/liquidate/merger non core business within the group"
It was 2005 when South Korean steelmaker POSCO signed a Memorandum of Understanding (MoU) with the government of Odisha to set up a 12 million tonne behemoth of a steel plant with an investment of Rs 52,000 crore.
It has been 10 years since but the steel plant still hasn't taken off.
Let's see what has changed since the MoU was first signed.
-- The state where the steel plant was to come up changed its name from Orissa to Odisha.
-- Nokia was still the world leader in mobile phones. Just last week, Microsoft decided to write-off nearly $8 billion (3/4th of the investment that POSCO promised in the plant).
-- Apple launched iPhone in 2007 and now commands 92% of the total profits of the global smartphone industry.
-- NASA's Pluto mission New Horizons took off in 2006, and this week it flew past by Pluto giving us breathtaking pictures of the dwarf planet.
-- Barack Obama became the first black president of the United States of America in 2008, and is now nearing the end of his second Presidential term.
-- For the first time in over two decades, India ended the coalition government rule and voted a political party in majority in the Lok Sabha.
-- The world saw an economic slowdown in 2007, its scale only second to the Great Depression of 1929-33.
So much has changed since 2005, but POSCO hasn't been able to move a muscle to set up a steel plant in India.
More so, reports suggest that the company has shuttered its office in Odisha and has finally given up hopes of producing steel in India.
Does this give a massive jolt to the now Prime Minister Narendra Modi's 'Make in India' campaign, where he is flying from one continent to another pleading companies and governments to set up manufacturing in India? Likely.
The land acquisition for the 12-million tonne capacity steel plant was the crux of the issue faced by POSCO, and the issue is still far from being tackled.
The erstwhile UPA government under Prime Minister Manmohan Singh did bring out the Land Acquisition Bill but it was stymied by various stakeholders.
As it turns out, the Bill has also become a bone of contention for Narendra Modi who has unsuccessfully tried to modify and convert it into a law.
But land wasn't the only problem faced by POSCO.
The company was promised high grade iron ore mines which it never got.
India plunged into a deep corruption scandal after the Supreme Court blocked iron ore mining in Karnataka, followed by Goa.
Once one of the largest exporters of iron ore, India was forced to import iron ore to continue running its steel plants.
POSCO, naturally, never got the iron ore mines it was promised and the steel plant, hence, remained elusive.
Touted as the largest foriegn direct investment (FDI) in India in 2005, the company now has to follow new rules of bidding for iron ore mining licences which it clearly isn't keen on since it was promised mines for free.
“We are tentatively suspending the Odisha (India) project due to lack of any progress,” Posco Chairman and CEO Kwon Oh Joon was quoted in a PTI report.
Another report in Bloomberg said that company wants better deals from Prime Minister Modi or else it is happy to carry on with the downstream work at its plant in Maharashtra.
(With Agencies)
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