Posco hits new roadblock in Orissa

Posco, the world’s No. 3 steelmaker by production, is facing a new hurdle in its long-delayed project to build an integrated steel mill in the Indian state of Orissa due to the country’s complex bureaucratic system, which continues to cause headaches for foreign investors.

According to the Financial Times on Friday, India’s National Green Tribunal, which was established last year, declared that the nation’s Ministry of Environment and Forests should conduct a “fresh review of the Posco project” before allowing the steelmaker to proceed due to environmental concerns.

“A close scrutiny .?.?. reveals that a project of this magnitude, particularly in partnership with a foreign country, has been dealt with casually, without there being any comprehensive scientific data regarding the possible environmental impacts,” the tribunal was quoted as saying by the British newspaper.

This is the second time the Korean steelmaker has encountered legal difficulties after it faced an appeal from Indian activists against the ministry’s approval of the project in 2007.

Posco described the latest development as a minor hiccup.

“The environmental license we won in 2007 remains valid,” said an official at the company. “And we agreed last year to review some of the conditions before we go ahead with the project.” He added that another review could mean more reviews.

This marks a change from the situation last week, when Indian Prime Minister Manmohan Singh met with Posco CEO Chung Joon-yang and pledged his full support for the project.

“Indian bureaucracy is much more complex than many people realize,” said Jeong Chae-seong, a professor of Indian studies at Hankuk University of Foreign Studies. “Posco will have to persuade bureaucrats of all levels, an expensive and time-consuming process.”

Posco and the government of Orissa signed an agreement to build a 12-million-ton steel mill and port in the state’s Jagatisnghpur District in 2005. However, as of last year, it had only acquired about half of the 4,004 acres of land needed to build the plant due to opposition from tribal communities and reams of red tape.

When the Orissa government inked the $12 billion deal with Posco, it was criticized in the Indian press for being too generous with India’s natural resources. Posco was promised a lease to mine 600 million tons of iron ore over a period of up to five decades.

By Song Su-hyun [ssh@joongang.co.kr]