Tue, Feb 12, 2013 - Page 6 News List

ANALYSIS: POSCO’s Indian dream fading as protests continue

Reuters, GOBINDPUR, India

A villager walks at the POSCO India Odisha Project site office at Gobindpur village in the eastern Indian state of Odisha on Thursday last week.

Photo: Reuters

A few weather-beaten shipping containers, a swathe of sand and a bitterly divided village: That is all South Korea’s POSCO has to show seven years after it announced plans for a US$12 billion steel mill on a fertile strip of India’s east coast.

Last week, the project took a step forward as land was taken over from farmers for the first time since 2011, and yet POSCO is still a long way from its goal of forging steel there. Despite the years of protests and battles over environmental clearances, POSCO insists it is not about to throw in the towel. However, if a court ruling on access to local iron ore goes against it, that could push it over the edge.

The fiasco over what was billed as India’s single largest planned foreign investment epitomizes the slow pace of industrialization in a densely populated country where almost every major project involves moving farmers off their land.

Indian Prime Minister Manmohan Singh has repeatedly vowed to change the snail-like progress of India’s biggest industrial developments and end delays to road building and power stations, blamed for dragging economic growth and fueling inflation.

However, the issues refuse to go away. “Police out! Death to POSCO!” a hundred or so villagers and Communist Party activists shouted at a group of policemen who set up camp in the village of Gobindpur last week, the first police presence there since protesters rose up against the project in 2006.

A few kilometers away, POSCO has built a site office in nine shipping containers. Along with a generator, a flimsy barbed-wire fence and a couple of signs, this is all the work that has been done on the 809 hectares set aside. They need another 280 hectares before work can begin.

POSCO India reiterated its “strong resolve and commitment” to the project in a statement on Friday, but analysts say the company may think again if a pending Supreme Court decision on preferential access to a local iron ore mine goes against it.

“They didn’t come here because of their love of India,” said Rakesh Arora, a metals expert and head of research at Macquarie Capital Securities (India). “Without the iron ore it would be cheaper to set up in China, where the capital costs are lower.”

A court in the state of Odisha has already ruled against POSCO on guaranteed supplies from the Kandahar iron ore reserve. Last month, the Supreme Court asked the central government for its opinion and it is expected to rule on the case this year.

Two senior sources at the POSCO project said the company would for now wait out the problems and it did not want to upset India, which it sees as an important long-term market.

The company has already scaled down the project because of the protests. Private farms and the village of Dhinkia, where the most fierce opposition has come from, are now excluded from the project’s first 4 million tonnes per year phase. The final goal is to produce three times that.

POSCO has also pushed its earliest start date back to 2017 after a tribunal suspended environmental clearance for the mill.

The project has split coastal communities in Odisha. One group of 52 families, for instance, says they were driven from their village by protesters after they criticized the movement’s Communist leaders. They now live in one-room houses on a small stipend paid by POSCO.

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