Odisha will offer to sell iron ore to Posco for steel project

State willing to reserve mine if SAIL, Posco enter a joint venture for Paradip project

The Odisha government will at a meeting on Tuesday ask Posco to buy iron ore at market prices from Odisha Mining Corporation for its $12-billion steel project in the state.

The Cabinet secretary, mines secretary and the Odisha chief secretary and mines secretary will meet Posco executives in New Delhi to discuss issues that have been holding up the project for 10 years.

After protracted agitation over land acquisition and delays in environment and forest clearances, uncertainty over allotment of captive iron ore mines has again put the project on the back burner.

The enactment of the Mines and Minerals Development and Regulation Act in January quashed Posco’s hopes of being accorded captive iron ore mines on preference. The law requires all mines to be auctioned.

“As the Centre has said Posco is not eligible for a mining lease on a preferential basis, we will offer them long-term iron ore linkage through Odisha Mining Corporation,” said a senior government official.

He, however, ruled out the possibility of the Centre making an exception for Posco, as requested by the state government. Such action would lead to demand for similar concessions from other steel makers, he added.

Odisha has another plan if Posco says no to buying iron ore from Odisha Mining Corporation. It may ask Posco to enter into a joint venture with a public sector steel company such as Steel Authority of India (SAIL) for the project. In that case, an iron ore mine can be reserved for the project.

Posco had signed an agreement with SAIL in 2011 for setting up a three-million tonne steel plant in Bokaro, but it did not materialise because both sides wanted majority stake in the venture.

Posco will need 13 million tonnes of iron ore a year to feed the eight-million-tonne steel plant it plans to set up in the first phase near Paradip. The Odisha government had suggested granting Posco a prospecting licence for the Khandadhar mines, but before the Centre could approve it, the new law came into force. “There is confusion whether Posco will set up the Odisha project. A clear picture might emerge tomorrow after the meeting,” said R P Panda, an industry analyst.