Posco Moves CCI Seeking Captive Mine Exploration Licence in Odisha

Mining co has stalled work on its $12-B Steel Plant, delayed by over nine years, till major clearances are approved

Ten years ago, soon after the Congress-led UPA came to power, Posco announced a $12 billion steel project in Odisha. It was, and remains, India’s largest foreign direct investment (FDI) proposal. A decade and two UPA terms later, the South Korean company is still struggling with clearances despite Prime Minister Manmohan Singh’s assurances on expediting approvals in January.

Now Posco has told the government that it’s put construction work on hold at the plant due to the Centre’s failure to grant critical approvals, specifically a prospecting licence that it needs to start exploring the mine allocated to it.

With India’s complicated clearance processes having set the project back by nine years, the company has sought urgent intervention by the Singh-led Cabinet Committee on Investment to allow exploration at its captive iron ore mine and commence plant construction.

It’s been to CCI before, having approached it late last year to try and hurry up long-pending green clearances. This took place in January ahead of a visit by South Korean president Park Geun-hye.

The impasse over the prospecting licence is despite a Supreme Court directive last May for an urgent decision on the case by the mines ministry.

The company had applied for the prospecting licence in 2005 and the state government had recommended this to the mines ministry in late 2006.

While CCI is unlikely to meet because of the general election under way, the mines ministry is re-examining the issue that Posco has flagged as a major stumbling block, senior government officials aware of the development said.

“In view of so much delay in according even a licence for activities like prospecting, Posco does not feel as much encouraged to go ahead with construction, especially when the project has already been delayed by nine years,” the company stated in a communiqué to the steel ministry sent in early March.

“The prospecting licence (PL) is meant only for exploratory activities and doesn’t entail grant of mining lease… actual mining operation is still a distant reality,” the company wryly noted, seeking action by CCI, set up to fast-track big-ticket investments because so many had got caught in red tape.

This development belies the optimism Singh had expressed earlier this year.

“I am very happy that the large-scale Posco steel project in Odisha is set to be operational in the coming weeks, following the revalidation of its environmental clearance,” the Prime Minister had said in a meeting with Park this January, promising that the “grant of mining concessions for the project is also at an advanced stage of processing."

Apart from exploration, Posco will have to apply for a mining lease to tap the ore, a process that could also drag on for years. Odisha has already handed over 1,704 acres of land to Posco and is in the process of transferring another 1,000 acres. Although the company had planned to start construction soon, it has now decided to wait until the prospecting licence comes through.

“It is highly desirable that the prospecting activities must go hand in hand with the progress on the construction side,” Posco said.

“We earnestly request you to kindly consider our situation as urgent and intervene… securing captive mines is essential for the commercial viability of our integrated steel plant,” it submitted to CCI. Describing the prospecting licence application’s long and arduous journey since 2005, during which the Odisha High Court as well as the Supreme Court ascertained the merit of its claims, Posco expressed surprise at a mines ministry decision last month to return the state government’s recommendation in favour of the South Korean company.

“Considering that our application has been examined and re-examined by various authorities, we think that at this stage raising fresh issues is not purposeful. Our application was already returned by the ministry in 2006, recommended again by the state in January 2009 and the honourable Supreme Court examined all the issues and finally directed the ministry to take a decision,” Posco told CCI.

The Posco project, if it gets under way, is expected to create nearly 50,000 jobs and also involves development of a port, power plant, railway line and township.

Following the Supreme Court’s directive last May, the mines ministry had sought clarifications from the Odisha government, which were given in January.

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