Controversy

POSCO hits a hornet'snest
BJP, SJM wary on iron ore export
By Sanjaya Jena

The Orissa government signed a Memorandum of Understanding (MoU) with South Korean steel major Posco for setting up a 12 million tonnes per annum integrated steel plant at Paradeep in Jagatsinghpur. The total amount, the South Korean intends to invest in the state, would be the biggest ever foreign direct investment in India.

The project would be completed in two phases. Each phase will consist of two modules of three million tonnes per annum. The first module is expected to be completed by June 2010. Thereafter, three million tonnes of capacity will be added every two years. Thus, the plant will reach its full capacity of 12 million tonnes by 2016.

The total investment by Posco in Orissa would be Rs 51,000 crore. The Union government is likely to be benefitted to the tune of approximately Rs 89,000 crore over a period of 30 years by way of excise and custom duties, service taxes and corporate income tax while the state government will earn around Rs 22,500 crore during the same period.

The entire project including mining, steel plant and port is likely to generate direct employment for around 13,000 persons and indirect employment for about 35,000 persons.

On behalf of government of Orissa, steel and mine secretary, Bhaskar Chaterjee signed the agreement while Posco'sexecutive vice president Soung-Sik Cho signed the document in presence of Chief Minister Naveen Patnaik and Posco chairman Ku-Taek Lee.

The total investment by Posco in Orissa would be Rs 51,000 crore. The Union government is likely to be benefitted to the tune of approximately Rs 89,000 crore over a period of 30 years by way of excise and custom duties, service taxes and corporate income tax while the state government will earn around Rs 22,500 crore during the same period.

But the agreement has fallen in controversy because several opposition political parties have been opposing the award of export of iron ore.

The MoU said the state government will make available around 600 million tonnes iron ore for captive use in 30 years time. The recommendation for mining lease will be made in two phases commensurate with the first two modules of 3 million tonnes each.

The first recommendation will be sent only after the company awards order to the extent of 50 per cent of civil and structural works and 20 per cent of the machinery of the first two modules.

The second recommendation will be sent when similar progress is made for the second two modules and after the first module of 3 million tonnes is commissioned. Grant of mining lease will thus be in a phased manner commensurate with the progress of the plant.

In case the company needs to import iron ore of low alumina content, it will be permitted to export equivalent quantity of high alumina content ore to its Korean plants subject to ceiling of 30 per cent of the ore consumed by their plant at Paradip in a given year, the MoU said.

?Orissa is on threshold of rapid industrialization. The Government of Orissa has already entered into MoUs with 36 companies for a capacity of 35.7 million tonnes of steel. With the MoU with POSCO, the total capacity would go upto 47.7 million tonnes per annum. This is more than the total production of steel in the whole of India today?, Chief Minister Naveen Patnaik said.

The total investment involved in all these MoUs is Rs. 1,18,000 crore. With all these factories coming into production, the industrial scenario of Orissa will undergo a sea change, the Chief Minister expected.

The ancillary and down stream industries are expected to further the process and provide employment to many persons of the state apart from much more revenue to government.

The Chief Minister said in addition to the steel investors, large companies had shown interest in manufacturing aluminium and stainless steel.

Swadeshi Jagaran Manch (SJM) said that 37 steel plants would need about 2,250 million tonnes of iron ore over the next 25 years. This will be roughly about 3/4th of the iron ore reserves of the state.

Instead of planning metal production spread over the next 100-200 years, the state government'sinitiative would consume valuable iron ore and bauxite reserve of the state in quarter of a century, SJM state convener Bibhu Prashad Nayak said.

The total investment involved in all these MoUs is Rs. 1,18,000 crore. With all these factories coming into production, the industrial scenario of Orissa will undergo a sea change, the Chief Minister expected.

This is expected to result in massive environmental degradation since the local environment has a limited capacity to absorb and assimilate effluents and wastes produced due to such gigantic production facilities being squeezed within a very short period of time.

For producing such a huge product, equally high amount of coal has to be burnt. Estimates say nearly 55 million tonnes of coal have to be burnt. It is also estimated that 22,000 MW of power will be produced ensuring large-scale affluent and wastes. If the period instead of 25 would have been spread over two centuries the pressure on nature would have been low.

Keeping in mind all these ill-effects, SJM feels that the government should go slow on industrialisation and instead of exploitation of nature it should be milked in a longer period of time.

Added to that, there is no need to allow POSCO to set up a 12 MT plant that too allowing swapping of 30 per cent of iron ore, the SJM said.

The SJM has petitioned Orissa Chief Minister highlighting its concerns and hopes he would ponder over long-term interest of the people of the state and generations ahead.

BJP state president Jual Oram has also expressed his apprehensions on swapping of iron ore issue. ?If POSCO wants to swap Orissa'siron ore with Brazil why is it not setting up its plant there?? Mr. Oram said.

Mr. Oram also expressed his apprehension as the MoU did not have any specific provisions for rehabilitation of displaced persons.