Setback for Posco's Indian project

Oct. 18, 2010 - South Korean steel giant Posco's long-delayed plans for a $12bn integrated steel mill and dedicated port in India's eastern state of Orissa were set back on Monday after an expert panel advised that the project's environmental clearances be withdrawn.
Although the advice is not binding, it is likely to influence Jairam Ramesh, the Indian environment minister, who appears keen to enforce environmental rules long treated as mere formalities more strictly. He is due to make a decision on the project soon.
Mr Ramesh recently rejected plans by London-listed Vedanta Resources to source bauxite from a mountain deemed sacred to members of an indigenous tribe. His ruling on Posco will be a test of New Delhi's expressed desire to balance industrial development with environmental and social protection.
Posco has been struggling to make progress on the project since June 2005, when it agreed to build a steel plant producing 12m tons a year to help meet India's fast-growing demand for the metal. It also plans to build a dedicated iron ore mine, road, rail and port links, a residential township for the workers, and water supply infrastructure.
A 10th of the more than 4,000 acres designated for the project is privately held, while the rest is government-held degraded "forest land". But the project has run into opposition from some of the 471 families who would lose their land, especially those engaged in betel-nut cultivation on the adjacent forest land.
The panel appointed by Mr Ramesh found that the Orissa authorities were not "fair and democratic" in observing laws intended to protect forest dwellers' rights before the land was granted to Posco. The panel also cited "serious lapses and illegalities" in the environmental impact assessment process.
The committee called for existing permissions to be immediately revoked and for the process of recognising forest dwellers' claims over the land to be started again from scratch.
Arvind Mahajan, head of natural resources at KPMG in Mumbai, said the Posco case reflected the wider difficulties that companies were encountering when starting large projects in India. "It's critical that the government sets up a framework to balance the country's industrialisation aspirations, environment concerns and the rights of people affected by big projects", he said.