Posco's Orissa project faces further possible delay

The environment ministry has asked Orissa to address concerns of villagers set to be displaced by Posco's $12 billion steel plant, a move that could further delay what is billed as India's biggest foreign investment.

Posco signed the agreement for the Orissa mill in 2005 and it was scheduled to begin production by the end of 2011. Protests, environmental worries and litigation over a related mining concession have delayed the project. Environment Minister Jairam Ramesh gave it clearance in January on certain conditions, including ensuring that tribal rights and forest protection laws are observed.

After the environment ministry's approval, the Orissa government was expected to acquire land for the world's third-biggest steel company.

Ramesh sent a letter on Thursday to the Orissa government asking it to pay heed to the concerns raised by villagers who would have to give up their land.

The Posco plant has primarily been delayed due to protests by local people who say the mill would ruin their lives by depriving them of their forest-based livelihood.

While Ramesh's move is expected to further delay land acquisition by the state government, it does not amount to revocation of the clearances given in January.

The environment ministry, which has already scrapped or halted several industrial projects, including plans by London-listed Vedanta Resources Plc to mine bauxite in Orissa, is pressing for stricter compliance with green laws, posing what some see as a threat to foreign investment.