Posco is backing away from a planned $12 billion steel complex in India, which has been stalled by local disputes and lease issues since it was proposed a decade ago, people familiar with the development said.
South Korea’s biggest steelmaker has tried to get back the money it gave to government agencies in the eastern state of Odisha to secure some of the land, and for railway connections, according to three people and company letters seen by Bloomberg. Six of 13 employees at Posco’s Indian unit overseeing the project have also “voluntarily” resigned, spokesman I.G. Lee said in a text message.
Posco’s Odisha project, the nation’s biggest foreign investment, has failed to take off since 2005 because of opposition from local farmers and the failure to secure iron ore mining leases. The steelmaker was able to overcome local resistance and get the state to acquire about 2,700 acres (1,093 hectares) of land for the first phase.
Securing supplies of iron ore, a key steelmaking raw material, has proved tougher. The federal government in January decided it would auction all mineral resources, including iron ore and limestone. That means Posco will now have to bid for securing iron ore blocks, which will increase costs.
Posco last month decided to shut its engineering and construction unit in India after failing to win orders, according to one person, who asked not to be identified as the matter is private, and letters sent to three employees. The Gurgaon-based unit, which designs steel plants, asked 35 employees, about half its workforce, to resign by Feb. 26.
Posco in July 2013 scrapped a plan to build a steel plant in the southern Indian state of Karnataka because of land and mining delays. The same month, ArcelorMittal, the world’s biggest producer of the alloy, pulled out of its steelmaking Odisha project, citing delays in getting permits.
Seeking Refund
In a letter sent to Haridaspur Paradip Railway Co. earlier this month, Posco India has sought a refund of 275 million rupees ($4.4 million) paid in 2006 for a 10 percent stake in the rail infrastructure firm mandated to lay the tracks, according to two people. Posco has also asked the Odisha Industrial Infrastructure Development Corp., or IDCO, to return money paid for the lease of seven acres of land, which has remained pending, according two people and a separate letter to IDCO.
— source bloomberg.com