POSCO-India Project: Defining Milestone for Indian Economy 상세내용
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POSCO-India Project: Defining Milestone for Indian Economy
date
2007-09-03 00:00:00
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The worlds 4th largest steelmaker and Korean steel giant POSCO acquired environmental clearance from Indian authorities on August 2, 2007, to proceed with its ambitious 12 billion integrated greenfield steel plant project in India.
Environmental clearance has been one of the major hurdles in the way of successful execution of the project. The Indian National Institute of Oceanography conducted the environmental impact assessment (EIA) for the plant.
Still, it took almost two years to get the environmental clearance for the project, which calls for state-of-the-art FINEX technology. Although this technical issue has finally been resolved, there are still many issues to overcome before mill starts operating.
The POSCO India project began with the signing of a memorandum of understanding (MOU) with the Orissa government in June 2005. The project was the single largest FDI proposal in India and also Koreas biggest single investment abroad to date. Progress on the project has been marked by repeated backward-forward movements, which have pushed the deadline for the plants groundbreaking until the second half of 2007.
The POSCO project is not only significant for the Korean steel giant but also a litmus test for investment in India and future economic tie-ups between Korea and India. Successful completion and operation of the project would provide an example which would give positive signals to similar proposals from other Korean companies.
The overall economic effect of the project is estimated to be around 278.6 billion for India -- a defining milestone in its economic development. However, various political vested interests and general ignorance have been able to disregard the projects benefits and throw up obstacles to block progress on the project. Critics have expressed apprehension about the profit-making motives of POSCO India, overlooking the fact that the company has shown strong commitment to its corporate social responsibilities (CSR) in India.
POSCOs Gwangyang Steel MillThe company has begun to work in areas such as education and healthcare by establishing the POSCO-TJ Park Foundation Scholarship to promote education for the students of Orissa and India. Furthermore, POSCO India has been working to come out with a detailed plan about its CSR and has promised to help improve the quality of life in India and Orissa.
The POCO project has bee mired in controversy from the very beginning with issues related to getting a license to operate ore mines, its status as SEZ, the issue of the captive port at Paradip, resettlement and rehabilitation, and ecological impact. Through a patient approach, POSCO India has shown its ‘willingness to pursue corporate diplomacy; have dialogue with all the opposition groups -- local residents, political parties and social activists -- to find out solution. The company has been trying to disseminate true facts and figures to minimize the possible controversies.
The first controversy related to the project involved POSCOs application for a prospecting license for new mines and for a mining lease for exploring existing mines and its proposal for export of iron ore up to 30% of the captive reserve. Though the company has promised to minimize the swapping of iron ore, a recent statement by the Industry Secretary of Orissa, Ashok Dalwai that ‘POSCO needs to add value to its proposal if it wants its application for a mining lease to be considered on a priority basis, has created misunderstanding and could cause further delay. It seems that the secretarys statement has put another hurdle in the process of finalizing a lease agreement with the state government.
The second issue of contention involves the possibility of making Paradip a captive port. The Anwarul Hoda committee set up by the Planning Commission of India is not in favor of captive ports for private companies. In its request, POSCO argues that its projected 25-30 million tons of cargo per annum would be physically impossible to be handled without having a captive port. To have a competitive edge over logistic is a sin-quo-non of modern day business operation.
The third area of contention is the issue of rehabilitation. Although the company has tried to adjust its plant layout over 60 times since 2000 to minimize the displacement to only 400 families and has committed to abide by Orissa 2006 Resettlement and Rehabilitation Policy, there have been protests organized by various political groups. The Kalinga Nagar incident, where local groups detained Korean employees of POSCO in January 2006, forced the company to scale back its requirement of 5000 acres of land to only 4000 acres.
It is important to note that 90 percent of the 4000 acres which POSCO wants to acquire is already state owned. The problem of acquisition is mostly related to only 300 acres of predominantly agricultural land. The company has promised to provide employment and sufficient compensation to the affected families, still the issue has not been resolved. The company has been consulting with the Tata Institute of Social Sciences, a leading social science research institute in India, to further smoothen the rehabilitation and resettlement process.
The fourth problematic issue for the project has been granting it SEZ status in India, which would allegedly result in loss of state revenue. However, critics miss the basic logic behind the SEZ, which attempts to spur foreign and domestic investment. The value chain of these investments would provide long-term benefits to the Indian economy as around 70-80 percent of the value chain will remain in India.
The fifth controversy is tied to the projects effect on the ecology of the region. Although POSCO has acquired an environmental go ahead, some political leaders are backing recent protests over the Orissa governments plan to lease the Khandadhar iron ore mines to the Korean company. They argue that it would destroy the regions natural beauty and rich flora and fauna. Even though the state government has already given assurances that a waterfall and other tourist spots would be kept outside of the project area and POSCO has agreed to abide by state guidelines, the protests continue.
Implication for bilateral engagement:
POSCOs Gwangyang Continous Casting FactoryWith a cursory look at the obstacles blocking implementation of the POSCO India project, it becomes obvious that either there has been lack of ination on the part of critics or some vested interests hope to secure political mileage out of the project. Everyone agrees that a feasibility study for the project and transparent debate are essential. At the same time, there is a need for political will on the part of the Indian and Orissa governments to remove all the unnecessary hurdles.
Although POSCO India has been accommodating -- addressing all the popular apprehensions, revising the project and disseminating correct ination -- central and state government reciprocity has been missing. It is important for the critics and government to realize the significance of the project, not only for luring future foreign investment but also for strengthening business ties between Korea and India.
Recently, the seventh round of negotiations on the Comprehensive Economic Partnership Agreement (CEPA) took place in India, with both countries anticipating new heights in bilateral economic cooperation should the free trade agreement come to pass.
The fate of the POSCO India project will substantially affect the potential to draw Korean investment into India. Many small and mid-sized Korean companies have been looking at the progress of the POSCO India project, and any mishap would definitely make them averse to invest in the Indian market.
The recent environmental clearance has given the POSCO India project a new lease on life. Hopefully, the other contentious issues can also be resolved soon, so India-Korea economic relations can make a quantum jump into the future.
