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Posco shelves Rs 32,000 crore greenfield plant in Karnataka

NEW DELHI/BANGALORE: South Korea's Posco has decided to shelve its plan to build a Rs 32,000-crore greenfield steel plant in Karnataka due to unavailability of a captive mine.

"The proposal was based on a captive iron ore mine, but the allotment of any captive mine was taking long," a senior Posco executive told ET. "The identified reserve (Ramandurga) that we had to share with other investors wasn't large enough for the kind of plans we had in mind."

Posco India's proposed 6 million tonnes per annum plant in Gadag district had also faced opposition from villagers led by the leaders of a local religious mutt.

"Karnataka is a critical player in India's steel market. We and the state agreed that while this particular project will not work, we could consider other projects in the future," the Posco executive added.

Posco had recently asked the state government to refund the Rs 60 crore it had paid for the 3,382 acres of land in Gadag.

Meanwhile, in view of the Supreme Court-imposed regional production cap of 30 mtpa, uncertainty continues over whether the state can allot Ramandurga to any of the companies whose names have done the rounds in the past. These include JSW - which has a 10mtp steel plant in Vijayanagar but no captive mine to feed it, 
Tata SteelBSE -1.13 % andArcelorMittal - both of which have promised to set up plants. The latter, though last year, withdrew its application for an iron ore deposit in the Donimalai range, stating that initial exploration had indicated insignificant and poor ferrous content. According to state officials, ArcelorMittal has also relinquished about 1,500 acres of the original 4,000 acres identified for its proposed steel plant at Kudatini.

Posco shelves Rs 32,000 crore greenfield plant in Karnataka

Posco, the world's fifth-largest steelmaker, says a Karnataka official was the last to sign on at the glittering mega investor event organised by the state in 2010. The company then had been committed to building a Rs 51,000 crore, 12mtpa greenfield plant at Jagatsinghpur in Odisha. But the project, five years after it had been inked, seemed to be running into regulatory obstacles, even as locals fiercely opposed land acquisition.

Karnataka, with its iron ore-rich districts of Bellary, Chitradurg and Tumkur, had seemed a good alternative to Posco, even as the Odisha project showed little signs of progress. Although company executives had noted the possible constrain with regard to availability of water in Karnataka, they agreed to build a 6mtpa steel plant.

Welcoming Posco's exit, HK Patil, the minister in charge of Gadag district where the plant was to have been located, said: "We don't know whether they have requested or not, but Posco going away from that area is a welcome move and the people of Gadag will be happy. Everyone knows the way Posco tried to get into Karnataka. There were a lot of allegations that there was no transparency, especially with the (BJP) government at that time."


Former chief minister BS Yeddyurappa, though, called it a setback. "It is the duty of the government to give proper attention and see that it (Posco) continues here. It is a setback. I will see it is continued; I will discuss with the chief minister," he said.

Meanwhile, the situation has improved considerably for Posco's Odisha project. After an 18-month ban on mining activities, operations have resumed in the state with an annual production cap of 30mt for the next few years. Earlier, when the 
Supreme Courthad announced its judgement, the South Korean company had seen a possible opportunity in the auction of a set of mines, identified as category 'C' for the serious nature of violations in their running.

However, a senior 
Posco India executive said: "The problem with the 'C' category mines is the valuations. It's uncertain how this will be done, and it may be a few years before their reserves are assessed again."

Posco has been handed over the 2,700 acres in Jagatsinghpur in Odisha for the 8mtpa steel plant. In May, the top court had given a favourable order that asked the central ministry to reconsider Odisha's recommendation for prospecting rights to the Khandadhar deposit in the state.