Mines ministry missive may hit Posco's swapping plan

Posco India may have to abandon its proposal for swapping of high alumina content iron ore found in the state with high grade ore from outside to meet the quality parameters of its proposed 12 million tonne greenfield steel project in Odisha.

Even the steel behemoth’s plan to swap iron ore within the country, a modified condition understood to be incorporated in the revised pact by the Odisha government may not hold ground if the latest order of the Union mines ministry is implemented.

The Central mines ministry has decided to impose a special condition under Rule 27 (3) of Mineral Concession Rules-1960 restricting sale or export of iron ore for all mining leases proposed to be executed or proposed to be renewed to an applicant who had been given preference in allotment by invoking special reasons under Section 11 (3) of Mines & Minerals (Development & Regulation) MMDR Act-1957.

The restriction is likely to impact Posco India as the state government had recommended Khandadhar iron ore mining lease in favour of the company, invoking special reasons under Section 11 (5) of MMDR Act-1957. The state government had cited value addition and biggest FDI project to substantiate its recommendation for Posco.

“The special condition imposed by the Union mines ministry will be examined. The state government will take appropriate steps to implement it,” said Deepak Mohanty, director (mines)-Odisha.

Asked if the ‘special condition’ will impact Posco, “The pact with Posco India is being revised. At this moment, I can't say what implication it will have on the company.”

Rajesh Verma, steel & mines secretary said, “The latest order of the Union mines ministry is for captive consumption of ore. As far as the Posco project is concerned, there has been some modification to the original MoU (memorandum of understanding) signed with the steel maker and it has to be examined.”

In the revised agreement to be signed between Posco, Posco India and the Odisha government, it was decided to allow the steel company to swap ore within the country. This marked a shift from the swapping clause of the original MoU which allowed the company to export ore, replacing it with an equivalent quantum of imported high grade ore.

The South Korean steel major needs 600 million tonnes of iron ore of an average iron content of 62 per cent to meet the requirement of the proposed steel project of 12 million tonne per annum (mtpa).

The new circular of the Union mines ministry, hitting the iron ore swapping plan of Posco, only adds to the woes of the company which is yet to overcome the hurdles involving land acquisition. Out of 4,004 acres required for the project, the government already has clear possession of 2,000 acres. The company had pleaded that it can start work on the first two phases of the project, comprising 4 million tonne each, if it is provided additional 700 acres, mostly belonging to trouble torn Gobindpur village.

However, the state-owned Industrial Infrastructure Development Corporation (Idco) had suggested that the acquisition of residual land can be expedited if the company spent about Rs 200 crore on different CSR (corporate social responsibility) activities for improvement of local area and community. The company, in a letter to Idco on Sept 18, has agreed to implement a part of the developmental works suggested and states that the rest activities can be taken up only after the progress of the project work.

“Unless the company agrees to implement the list of development works in toto, it will be difficult to acquire the residual land,” sources in the government said.