Within days of Prime Minister Manmohan Singh’s assurance to South Korea that all was well with the $12-billion Posco project, the situation has taken a new turn. In a major setback to the South Korean steel giant, the National Green Tribunal today suspended the environment clearance granted to Posco’s proposed mega project in Orissa a year ago.
The directive has put at risk the single largest FDI (foreign direct investment) in the country so far, in addition to hampering the already poor investment climate. The Vodafone tax case, the subsequent Budget announcement on retrospective taxation and the cancellation of telecom licences, including those of Russia’s Sistema and Norway’s Telenor, have all added up to give India the image of a poor investment destination.
A few days ago in Seoul, the PM had told South Korean President Lee Myung-bak that the Posco project was in progress and would be implemented soon. “I recognise that sometimes our processes can be slow, but there are effective mechanisms for resolution of problems and differences and a strong rule of law. The government is keen to move forward with the Posco project and there is some progress in this regard. I believe India is a stable and profitable long-term investment opportunity,” the PM had said on March 26. He had said investment from South Korea was a priority. “We will take proactive steps to address investor grievances and improve the business climate in the country. I urge the Korean industry to have faith in India,” Singh had said.
The Green Tribunal has directed the environment ministry to review the clearances given to Posco in January 2011. The company could not be reached for an official statement, despite repeated attempts. Officials, who did not want to be named, said the tribunal had not cancelled the clearances granted to Posco in 2007, and added it had just suspended the final clearance given by Jairam Ramesh, the then environment minister, in 2011. However, they admitted the latest development would cause further delay in the project.
The Green Tribunal said, “The final order dated January 31, 2011 made by the MoEF shall stand suspended till fresh review.” The tribunal directed the environment and forest ministry to review afresh the clearance for the project and attach "specific conditions" which Posco would have to follow in a "defined timeline".
The industry termed it an unfortunate development, but many preferred not to talk about it on record, as the matter was sub judice. Among the few who spoke, Rajiv Kumar, secretary general of the Federation of Indian Chambers of Commerce & Industry (Ficci), told Business Standard, “This will further add to the mounting loss of investor confidence in the country.”
Industry chamber Assocham said it was a “disturbing” development, which could have an adverse impact on the future investment climate.
A Posco spokesperson had earlier told Business Standard, "There is no point in selling India as an investment destination, when the investments which have already come are facing multiple problems and are not able to move forward."
| THE POSCO SAGA: STALLED AGAIN June 2005 The Orissa government and Posco sign an agreement for setting up an integrated steel plant in the state Sep 2006 Posco applies for environmental clearance for the captive minor port April 2007 Posco applies for environmental clearance for the captive power-cum-steel plant May 2007 Gets environmental clearance for the captive minor port June 2007 The Orissa government seeks approval from the Ministry of Environment and Forests (MoEF) for diversion of 1,253 hectares of forest land to Posco July 2007 Posco gets environmental clearance for the captive power-cum-steel plant Sep 2008 The stage-one clearance for diversion of forest land is granted Dec 2009 The final clearance for the diversion of forest land was given Jan 2010 The environment ministry clarifies to the Orissa government that the final approval for the diversion of forest land in favour of Posco is conditional and subject to the settlement of rights of forest dwellers under the Forest Rights Act, 2006 March 2010 The Orissa government writes to MoEF conveying there are no traditional forest dwellers April 2010 MoEF, along with the Ministry of Tribal Affairs, forms a committee under N C Saxena July 2010 A four-member committee is formed to examine all issues relating to the transfer of forest land Aug 2010 The Saxena committee submits report, indicates non- compliance Aug 2010 MoEF asks the Orissa government to stop transferring forest lands Oct 2010 The four-member committee gives a divided opinion in the report Jan 2011 The ministry gives conditional clearance to the project Early 2011 A petitioner files a case in the Green Tribunal challenging MoEF’s conditional clearance to Posco Jan 2012 Posco is till waiting for the Orissa State government to hand over the land required for the project. Says hopeful of starting work on the project March 2012 The National Green Tribunal suspends the environmental clearance given to Posco on January 2011. It also asks MoEF to review it afresh |
The Orissa government distanced itself from the verdict, saying, “The state government has no role to play in this regard”. Chief minister Naveen Patnaik said, "We will see what needs to be done.” Union environment minister Jayanthi Natarajan said, "I don't think the two things (the PM's assurance to South Korea and the tribunal order) are connected."
Natarajan said her predecessor (Jairam Ramesh), who granted the clearance to Posco, had followed "very strict and transparent procedure and systems".
The tribunal said the memorandum of understanding between the Orissa government and Posco stated the project was for production of 12 million tonnes of steel per annum (mtpa), but the environment impact assessment report had been prepared for just four mtpa of production in the first phase.
