Saturday, July 23, 2011

The issue with POSCO

The Pohang Iron and Steel Company, or POSCO is a leading steel producer of the world,  third largest steel maker by market value and Aisa's most profitable steelmaker. Its major competitors are Arcelor Mittal, Nippon Steel, JFE Group, Tata Steel and Bhusan Steel.


POSCO signed a Memorandum of Understanding (MoU) with the Government of Orissa in June 2005, to set up a 12-mtpa green field steel plant near Paradip, Jagatsinghpur District, Orissa, with an estimated investment of USD12 billion or Rs.54,000 crore. The company will build a 4 million tonne per annum capacity steel plant in Orissa, during the first phase of its project by 2010 and expand the final production volume to 12 million tonnes per annum. POSCO-India Pvt. Ltd. was incorporated in 25th August 2005 with the Registrar of Companies, Orissa, under the Companies Act 1956.(source: POSCO-India website).


For POSCO, it made all sense to venture into India and China as strategic expansions, and while it has already invested over $2.4 billion in Mainland China, it has not been able to move ahead in India, due to non-ability of the State Government to acquire land. Locals are creating the problem and blaming the Government for illegal attempts to acquire land.


Despite the fact that it is the largest FDI investment in the history of India, POSCO seems to be appearing more on papers than going greenfield, with land acquisitions seemingly creating problems for the officials even after almost 6 years of the incorporation of the Company.


Jairam Ramesh has already given a go ahead for forest land clearance for POSCO's greenfied project . On May 28 Dhinika sarpanch Sisir Mohapatra  was suspended for misleading the Government against the project.


On June 3 , 2011, the State police detained a Basudev Behera, for  creating nuisance against acquisition of his illegal betel nut vine. The police also arrested 17 others on similar grounds. Though most of the locals have vowed to give up their land for POSCO's project and the company in return promises to take all the steps to safeguard the environment and for its effective corporate governance, we still do not see the project taking shape as it should.


The economy of Orissa has been lagging behind the national economy by several decades. Its per capita net state domestic product, a measure of average income, stood at Rs.20200 for 2006-07 which falls behind the national average by about 35 per cent. Orissa shows the highest head count ratio (HCR) of poverty at 46.6 per cent in 2004-05 among the states in the country (as per Economic Development in Orissa, Indira Gandhi Institute of Development Research, Mumbai, November 2008).


But there have been unhealthy remarks about the project not profitable for India, by human rights activist Binayak Sen. It is claimed that the Company would make a profit of Rs.3 lakh crore on an investment of Rs.54,000 crore.


POSCO issue is an example of how cautiously or not the Government is making such huge investment decisions, which will affect the health of the nation in the longer run. Transparency and speed are of utmost importance in the way Indian officials work. For everything else, why not discuss the pros and cons of the project and let the masses decide after placing the figures on the table. Alas! but there are no figures for the masses to analyze just as POSCO has no land.

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