File picture of chief minister Naveen Patnaik with Posco India chief at the MoU signing ceremony in 2005

Bhubaneswar, May 3: The memorandum of understanding, between the Posco and the Orissa government for the establishment of a 12-milion-tonne steel plant near Paradip in 2005, which expired last year, is likely to be renewed soon.

“The MoU will be renewed soon,” said industry and steel and mines minister Raghunath Mohanty.

Mohanty said that the draft MoU submitted by the Posco had been scrutinised by the Industrial Promotion and Investment Corporation Limited (IPICOL), the designated nodal agency. The draft had also been vetted by the law department, he said.

“The steel and mines department is now examining the draft MoU and it will be finalised soon,” said the minister.

The Posco had signed an MoU with the Orissa government on June 22, 2005 for establishment of a 12 MTPA Greenfield steel plant near Paradip. However, the project failed to take off due to resistance by the local people and the MoU, which had been valid for five years, expired on June 22 last year.

The original MoU had a contentious provision for export of iron ore in exchange of imported higher-grade ore. This provision was opposed by the Opposition parties, including a section of the BJP. The BJP was then a coalition partner with the BJD.

Making a reference to the said provision, Union environment and forest minister Jairam Ramesh, in his yesterday’s order for forest clearance, said: “This provision made me deeply uncomfortable with this project.”

“I would expect that the revised MoU would be negotiated in such a manner that exports of raw material are completely avoided,” said Ramesh.

Asked as to whether the Orissa government would consider Ramesh’s suggestion, Mohanty said: “We have not yet received the order. We will take a decision after examining his suggestion.”

Welcoming the MoEF’s clearance to forest diversion proposal for the Posco steel plant project, the minister said: “It will mark a new beginning for the industrialisation drive of Orissa.”

Stating that the hurdles for the Posco project had been removed, Mohanty said the land acquisition process would resume soon.

The land acquisition activities had come to a standstill on August 5 last year following a directive of the Union environment ministry. Though the ministry accorded conditional clearance to the project on January 31, it had still remained stuck as the approval to the crucial forest diversion proposal was pending.

Though the obstacle for land acquisition has now been cleared, the issue of mining lease for the project, however, remains entangled in litigation.

Earlier in July last year, the high court had rejected Orissa government’s decision to grant prospecting license (PL) for Khandhar iron ore mines in favour of the Posco. The Orissa government has filed a special leave petition in the apex court challenging the high court order.