The Mesco plant in Jajpur. Telegraph picture

Bhubaneswar, July 17: South Korean steel major Posco has signed an MoU with Mesco Steel to set up another unit at the latter’s existing facility in Kalinga Nagar.

Confirming the development, an official at the Mesco chairman cum-managing director Rita Singh’s office in New Delhi said: “The talk is in the initial stage. The management does not want to discuss the issue at this moment.”

Officials at the Mumbai office of Natash Singh Sinha, who is Rita’s daughter and currently director (finance) of Mesco Steel, too, confirmed that a deal had been inked with Posco. However, the officials refused to divulge details about the project.

Sources in Posco, however, said the company would dismantle its six lakh tonne Finex technology steel plant in South Korea and re-assemble it at the site of Mesco’s Kalinga Nagar plant.

“The Finex technology, in which Posco enjoys patent, is one of the best available in the steel sector. The plant does not require imported cooking coal,” said a Posco official.

“The technology helps to produce steel even with low grade iron-ore. Besides, the pollution level will be low compared to other technologies,” said an official, adding that the company had also tried to explore ventures with the Steel Authority of India Limited (SAIL) and planned to set up a plant in Bokaro. But they failed to make any breakthrough after SAIL did not show any interest in the proposal.

Mesco’s steel plant, which has an annual capacity of 1.2 MTPA, is planning to enhance its production to 3.5 million tonne per annum. It is also trying to get the best technology available in the filed.

“It will be a win-win situation for both the companies. Posco is finding it hard to push its eight million tonne steel plant project in Paradip for various reasons. Now, the existing steel plant of Mesco will provide it an opportunity to establish itself in Odisha. The move is certainly a welcome step. It will push Odisha’s industrialisation,” said president of the Utkal Chamber of Commerce Ramesh Mohapatra.

The MoU of Posco with the state government has expired since 2011. The Posco project, which has got an environmental clearance in January last, was originally planned to come up on 4,004 acres near Paradip.

However, strong opposition from a section of local residents forced it to downsize the project to eight million tonne and built the unit on 2,700 acres in the first phase.

The biggest hurdle to the project, however, is mining rights as the plant cannot function without raw materials. The issue of Khandadhar mines has been contentious from the beginning. The recommendation of the state government in favour of the company has twice met with resistance with the issue reaching the court.

Sources said if Posco went ahead with its Mesco plan, it doesn’t need to scour for mines immediately. At the moment, Mesco sources it raw materials from Roida and Malangtoli mines. Both the mines are well managed with estimated reserves of more than 1,000 million tonnes of iron-ore.