Tripartite pact for Posco MoU renewal

After suffering a delay of nearly two years since the lapsing of its Memorandum of Understanding (MoU) in June 2010, Posco India can now hope to breathe easy.

The steel & mines department and the company authorities have mutually agreed to have an ‘instrument of renewal’ at the earliest for a span of five years, a day after Posco India chairman cum managing director Yong Won Yoon met chief minister Naveen Patnaik on Wednesday, in a damage control exercise, to put the mega steel project on the fast track.

The instrument (legal agreement) has been necessitated after the law department objected to renewal of the expired MoU with the South Korean steel firm.

“The instrument will be a tripartite agreement involving Posco, Posco India and the Odisha government. The revised pact will modify the contentious ore swapping clause incorporated in the original MoU wherein we will allow Posco India to swap ore within the country. In addition, there will be the mandatory employment clause of the state government which the company has to abide. We will soon seek government order for the revised pact,” a top official source told Business Standard.

Earlier, several rounds of talks between state officials and company authorities had remained inconclusive, purportedly over differences between the two sides on issues of ore swapping and employment clause.

Initially, Posco India had expressed its reservations over the ‘employment clause’ which stipulates that industries setting up their projects in the state have to reserve 90 per cent jobs for locals in the unskilled and semi-skilled category, up to 60 per cent in skilled category and 30 per cent for the supervisory and managerial cadre while giving them the option to fill up the post of senior executives from the open market.

The steel maker has requested the state government to allow it to swap high alumina content iron ore found in Khandadhar mines with better quality ore found elsewhere in the country.

The previous MoU, signed on June 21, 2005, allowed the company to export 30 per cent of iron ore reserve allotted to it and import same quantity of high grade ore. The company justified this concession saying the iron ore found in Orissa had relatively high alumina content, which required blending with high grade ore for better blast furnace life and productivity.

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).

On Wednesday, Posco India clarified that it had no intention to downsize capacity of its proposed 12 mtpa steel mill. The steel company said it was ready to start construction activity for eight mtpa plant on receipt of 2,700 acres of land from the state government, raising capacity subsequently to 12 mtpa after getting the remainder land. The company needed 4,004 acres for its greenfield steel mill proposed near Paradip.