Saved by the bell

Posco signed the deal with the Odisha government in 2005 and the project had been strongly backed by both Chief Minister Naveen Patnaik and Prime Minister Manmohan Singh.

Published:January 11, 2014 4:14 am

Posco sends a belated signal of resolve. MoEF must hurry up with other clearances now.

After being mired in environmental clearances and stalled by problems of land acquisition for eight years, the $12.6 billion Posco steel plant in Odisha has finally been approved by the Union environment ministry, a few days before South Korean President Park Geun-Hye’s official visit. The Posco plant is India’s biggest foreign direct investment and arguably a litmus test for resuscitating FDI inflows choked by the pervasive delays in project clearances. Since taking over as environment minister in December 2013, M. Veerappa Moily has cleared about 15 projects, including the Tawang II hydel project and the Teesta IV hydroelectric project. The delays, over the tenures of two consecutive environment ministers, were due to a political irresolution and cussedness that has contributed towards bringing GDP growth to a decade’s low of 4.6 per cent for the first half of 2013-14, down from 9.3 per cent in 2010-11.

Posco signed the deal with the Odisha government in 2005 and the project had been strongly backed by both Chief Minister Naveen Patnaik and Prime Minister Manmohan Singh. Despite this, the firm had to appeal recently to the Competition Commission of India and the Project Monitoring Group. The steel plant has now been judiciously de-linked from the port project to expedite clearance for the former, but it is important to recall the enormous hurdles that were placed in its path, including evaluation committees packed with environmental activists certain to vote against every project. In Posco’s case, one expert group claimed 70 per cent of the area was forest, but a former environment secretary found the land was mostly sandy, with scrub forest. While one major expert objection was that no attempt had been made to identify the tribals who would be dislocated, the ministry itself had to admit the site was not a Fifth Schedule Area. In the process, the steel plant and port project was reduced from 4,000 acres to 2,700 acres and Posco also pulled out of its $5.3 billion steel plant in Karnataka.
The cabinet secretariat has sent Moily a list of 27 stalled major infrastructure projects, one of which was Posco. The Posco project has the potential to create 48,000 jobs, make an annual value addition of Rs 3,530 crore and add upwards of Rs 12,000 crore each year to Odisha’s GDP. At a time when India desperately needs foreign exchange and FIIs are either exiting or vacillating, FDI flows need a dramatic jump. As Moily is discovering, several projects need no more than his signature. The ministry should use the few months left before elections to speed up clearances.

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