Odisha might let Posco operate an iron ore mine

Could be via a joint venture with state entity, such as the one originally meant for Rio Tinto; Patnaik says they're trying to keep the Korean major's interest

The Odisha government is considering an option to allow South Korean steel giant Posco to operate iron ore mines without taking part in a bidding process.

It has been trying very hard to woo the steelmaker back, in the backdrop of the new mining rules which ended the the provision of owning a lease on a preferential allotment basis, sources said.

The option includes entering a joint venture (JV) with state-owned Odisha Mining Corporation (OMC) to operate a lease, very much like Vedanta (now Sesa Sterlite) had one for mining bauxite deposits at the Niyamgiri hills.

The recently-enacted Mines and Minerals (Development and Regulation) Act says state-run enterprises can enter into a JV with private entities for mining operations, with not less than 76 per cent stake.

OMC currently holds leases for 11 iron ore mines, with annual production potential assessed at 30 million tonnes. However, it is producing only two mt annually. Similarly, it has been allocated the Malangtoli mines with roughly 700 mt of deposits (supposed to be developed by Rio Tinto) but this is idle for want of clearances and approvals.

According to sources, the state government is considering options to allow Posco operate the Malangtoli mines, via a JV with OMC. The latter's officials declined to comment, saying the rules on mine leases owned and operated by government companies are yet to be formulated.

Posco has been lackadaisical in taking forward its steel project ever since the Union government made it mandatory for every entity intending to own a mine lease for taking part in an auction. The new rule is contrary to Posco's agreement with the Odisha government in June 2005, which said the steel producer would be allotted a mine lease to feed its plant.

The company has downsized its staff strength since then and had even asked government agencies to refund the money paid by it for development of a rail corridor and for facilitation of land acquisition for its proposed plant near Paradip, signalling withdrawal from its proposal.

However, the state government has said it was doing what was possible to ensure this did not happen. Chief Minister Naveen Patnaik recently said his government was ‘trying very hard to see that the Posco project is set up’. Similarly, steel and mines minister Prafulla Mallick has already said OMC is ready to provide raw material to the steel maker on a long-term basis, even if the option of owning a mining lease was over.

State mines secretary R K Sharma declined to comment about the possibilities being considered by the government for Posco, saying it would be inappropriate for him to speak, as the CM already had.

In the past, OMC has pulled out from every mining venture it has entered, on various issues. Earlier this year, it scrapped mining JVs with Rio Tinto, Sesa Sterlite and Hindalco for iron ore and bauxite mines. In 2012, it nixed a coal mining JV signed with Delhi-based coal miner Sainik Mining, due to rule violation in the agreement.