The much awaited MoU between Pohang Steel Co of Korea and the Orissa government for the steel company's 12 million tpa steel plant in Orissa was signed on 22 June 2005.

The MoU was signed by Mr Soung-Sik Cho, Executive Vice-President of Posco, and Mr Bhaskar Chatterjee, State Steel & Mines Secretary, in the presence of Mr Naveen Patnaik, Orissa Chief Minister, and Mr Ku-Taek Lee, Chairman and Chief Executive Officer of Posco.

The proposed integrated plant would be set up at Paradip in Jagatsinghpur district at a cost of $12 billion (approx Rs.52,000 crore) making it India's largest foreign direct investment till date. For Posco, the world's fifth-largest steel producer, this would be the first project outside Korea. Of the total investment of $12 billion, around $2 billion will be used for developing supporting infrastructure like roads and ports.

The project will come up in two phases, each involving two modules of 3 million tpa capacity. The first module will come up by June 2010. Thereafter, steel capacity of 3 million tpa will be added every two years, taking the plant to 12 million tpa by 2016.

Posco will set up a company registered in India by August 2005 that can then apply for mining lease, and execute the project.

Mining lease: The Orissa government has provided iron ore linkage of 600 million tonnes that would sustain the 12 million tpa steel plant for 30 years. (On average one tonne of steel needs 1.6 tonnes of iron ore). Iron ore will be made available from the mines of Keonjhar and Sundargarh districts. The recommendation for mining lease will be made in two stages. The first stage would be reached only when Posco awards 50 per cent of the civil works contract and 20 per cent of the machinery for Phase I (modules 1 and 2) of the project. The second recommendation would be made when the project reaches the same milestone for Phase II (modules 3 and 4), assuming that Phase I is fully commissioned by then.

Employment: Once fully commissioned, Posco's steel plant is likely to generate direct employment for 13,000 persons and indirect employment for 35,000. At the construction stage, the project would need 18,000 skilled labourers daily.

Revenue: The Central government is likely to earn Rs.89,000 crore (in nominal terms) by way of indirect taxes (excise, customs, service tax) and direct taxes (corporate income tax), over the 30-year period. The state government would earn Rs.22,500 crore by way of taxes.

Iron Ore exports: The Orissa government has clarified that Posco would be allowed to export iron ore only as a means of substitution, and not trade. Accordingly, Posco can export up to 30 per cent of its iron ore requirement in a year in exchange of imported iron ore from Brazil. The export from India will be made only after imports of Brazil, and not the other way around.

With the Posco MoU signed, Orissa's tally of MoUs entered into for steel projects has touched 37 with a total production capacity of 47.7 million tpa.

Also See:

Posco MoU today (22-Jun-05)