New Delhi, Dec. 26: The government is not in favour of giving Korean steel major Posco a majority stake in a joint venture with Steel Authority of India Ltd (SAIL).

Steel minister Virbhadra Singh told The Telegraph, “As yet I am not convinced of the need to give a majority stake to Posco (though) they (Posco) will be transferring proprietary technology Finex which uses iron ore fines and less coal in steel making, which makes the joint venture proposal attractive.”

Posco’s plan to set up a 12-million-tonne plant in Orissa is also on hold over environmental concerns.

Posco is believed to be seeking a controlling stake — 74 per cent — in the joint entity as it is bringing in a new technology.

SAIL, on the other hand, wants to restrict Posco’s stake to 50 per cent on the grounds of the PSU providing land in Bokaro, infrastructure support such as power supply, road and rail connections and raw material to the project.

Though a detailed report for the 1.5-million-tonne plant is being prepared, the stake tussle has become a major stumbling block for the Korean company’s plans to enter India.

“We have been in talks for some time but the equity issue has to be resolved,” said Singh.

Officials have been arguing that while technology can be bought, getting land and raw material is far more difficult and, hence, commands an equal premium.

SAIL has a huge stock of iron ore fines but uses them in a limited manner. The state-run steel maker owns 35 million tonnes of fines at Gua, one of its oldest mines. Indian ore with over 60 per cent iron content was sold for as high as $193 a tonne in April. Calculated at this rate, the Gua reserves are worth around $700 million.

SAIL has alternative plans for the fines. It wants to set up two pelletisation plants, which can utilise the fines to churn out iron pellets for steel mills.

Sources said the plants could cost Rs 2,500 crore each.

Differences have also cropped up over the technology that Posco wants to provide to the joint venture.

The Korean steel maker wants to transfer the cold-rolled non-grain oriented (CRNO) technology and not the coveted cold-rolled grain oriented (CRGO) technology to make steel used in electrical equipment.

SAIL already makes CRNO steel at Rourkela, though of an inferior quality compared with Posco’s, but does not make CRGO steel that is in high demand worldwide.

Only a few firms, including Posco and US-based Armco, possess the CRGO technology.

The SAIL scrip closed at Rs 185.35 on the Bombay Stock Exchange on Friday, down 1.10 points, or 0.59 per cent, from its previous close.