Biggest FDI: Posco in Orissa with $12 bn

Under the agreement, $3 billion will be invested initially between 2007 and 2010 to build a 3-million-tonne plant, which will start production from 2010, Posco said in a statement. Then, 3 million tonnes will be added every two years, taking it to 12 million tonnes by 2016.

The project also involves building a 30-million-tonne iron ore mine, a mill for making hot-rolled coil and a sea port. It is estimated to generate 48,000 jobs.

The government of Orissa also granted Posco mining lease rights for 30 years to supply a total of 600 million tonnes of iron ore to the new plant.

However, it was not immediately clear whether Posco and Orissa had reached an agreement to let Posco swap exports of low-grade iron ore for imports of high-grade ore. Allowing Posco to export the iron ore has been the main obstacle to the deal.

Steel demand in India, Asia’s fourth-largest economy, is rising as investment in infrastructure increases and demand soars for housing and durables such as cars and consumer goods. Global steel making and mining firms have warmed to India’s steel industry due to its affordable labour and the world’s third-largest deposits of coal and iron ore.

Mittal Steel Co., the world’s leading steel maker, is among other global players to have expressed an interest in setting up production facilities in India, which has a per capita steel consumption of just 30 kg, compared with China’s 180 kg.

But India, as compared to China, has struggled to attract foreign money. India received just over $4 billion in foreign direct investment in the first 10 months of the year to March, compared with $50 billion for China.

Asked whether the entry of global steel majors like Posco and L N Mittal would affect Tata Steel — which announced a Rs 25,000-crore investment plan today — its CEO B Muthuraman said: ‘‘The steel scenario is such that their entry is always welcome.’’ On the controversial export of iron ore from India, Muthuraman said the issue needs to be looked at in the ‘‘right perspective’’. The country has reserves of about 20 billion tonnes of iron ore but given the population and future per capita steel consumption, India has the potential to consume the entire reserves and these might be short in the long run.

The MoU was signed in the presence of Orissa Chief Minister Naveen Patnaik, Korean Ambassador to India Jung Il Choi, commercial attache in the South Korean embassy Byeong Cheol Lee, and Posco’s Chairman Ku-Taek Lee. Posco’s executive vice-president Soung Sik Cho and Orissa’s principal secretary in the steel and mines department, Bhaskar Chatterjee signed the agreement.