Bhubaneswar, June 22: Ringed by barricades and platoons of policemen, Orissa and a South Korean steel giant today sealed India’s biggest foreign direct investment deal.
Under the agreement, Pohang Steel Company (Posco) will set up a $12-billion (Rs 52,000-crore) steel plant in the state that has been aggressively marketing itself as an ideal investment destination.
Once it reaches full capacity, the plant will churn out 12 million tonnes (mt) of steel. India’s largest steel company, SAIL, now produces 13 mt, while Tisco makes 7 mt.
The project of Posco, the world’s fifth-largest steel-maker, will source its raw material from a mine in which it will have a 30-year lease to use 600 mt of iron ore.
The memorandum of understanding signed today permits the Korean company to export 30 per cent of the 600 mt high-alumina-content iron ore allotted to it ' an issue that has prompted protests from the Opposition, especially the Left.
But the ore export will be allowed only after an equivalent quantity of better quality (low alumina-content) ore has been brought into Orissa for the plant, chief secretary Subas Pani said. There will thus be no net outgo of ore from the state.
Ore containing high alumina ' such as the one in Orissa ' is not cost-effective in the blast-furnace method that the Korean company proposes to use in the new plant. That method needs low-alumina ore ' the reason why the company will be importing it from Brazil.
Hours before the deal was signed by Posco executive vice-president Soung-Sik Cho and Orissa steel and mines secretary Bhaskar Chatterjee at the secretariat, over 200 protesters were arrested outside the venue.
While the Congress, the chief Opposition party, shied away from opposing the deal, the CPI, CPM, Orissa Gana Parishad and the Janata Dal (Secular) railed against the clause that allows ore export.
Fifteen platoons of the special armed police were deployed in and around the secretariat complex and barricades erected to keep the protesters at bay. But Posco chairman Lee Ku-taek was unfazed.
“Once the project starts, a lot of people would start understanding the project,” he said after the deal was signed.
The plant is expected to start production by 2010 and reach full capacity by 2016.
The Centre may earn about Rs 89,000 crore over 30 years and Orissa Rs 22,500 crore through taxes and royalties.
The entire project ' including the mine, steel plant and port ' is likely to generate direct employment for 13,000 people and indirect employment for another 35,000.
Before that, when construction reaches its peak, Posco would need more than 19,000 skilled workers (such as carpenters, welders, brick layers, painters and electricians) every day.
“The investment deal is significant in the history of the world’s steel industry as it is the first time that a steel-maker is building an integrated steel plant adopting the blast furnace iron-making process abroad,” the Posco chairman said.