Panel majority want Posco clearances scrapped

A review of South Korea's Posco steel mill project in Orissa says the plant could violate forest laws, and a majority of the review panel says existing green clearances should be scrapped, the Environment Minister told reporters on Monday.

The four-member panel presented two separate reports which will now be examined on October 25 by the country's Forest Advisory Committee. The panel's report is not final. Environment Minister Jairam Ramesh will take a final decision.

"Both reports say there are weaknesses and infirmities in the way the forest rights issue is being implemented," Ramesh said, adding that both reports called for Posco to carry out fresh environment impact assessment for its $12 billion mill.

If accepted by the minister, this could mean further delays for the project whose clearance is seen by many as a test case reflecting India's investment climate.

Ramesh said three of the four members of the panel had recommended that existing green approvals for what is described as India's biggest foreign direct investment be cancelled while the company carries out a fresh assessment.

In August, Environment Ministry ordered a halt to all work on the project, including land acquisition, while the panel probed if the forest rights act that seeks to protect forest land and settlers had been violated.

The South Korean company is among several corporations, including London-listed Vedanta Resources, whose Indian projects face delay as a proactive environment ministry tightens rules that often brings it in conflict with other government ministries pushing for rapid industrialisation.

Posco was scheduled to begin production from its plant in Orissa state's Kujanga region by the end of 2011. The memorandum of understanding for the mill was signed in June 2005 which also included captive iron ore mining rights in the state's Khandadhar area.