The chief minister of Orissa has appealed to the prime minister to allow South Korea’s POSCO(005490.KS) to continue work on a giant iron ore project after the environment ministry ordered a halt. Stopping work at this stage on a proposed $12 billion plant would be counterproductive and affect the investment climate in the country, Naveen Patnaik said in a letter to the prime minister, according to a senior state official, who asked not to be named as he is not authorised to speak to the media. POSCO, the world’s third-largest steelmaker, wants to mine iron ore in the Khandadharnear region of Orissa and signed a memorandum of understanding in June 2005 for the plant, which was to be built in three phases by 2016, with production scheduled to begin by the end of 2011 at the completion of the first phase.
But the project, touted as India’s biggest foreign direct investment, has been repeatedly delayed due to protests by farmers who fear losing their land and livelihood. On Friday, Environment Minister Jairam Ramesh said the state had been directed to stop all work on the project, including land acquisition, as a special committee had found it violated the forest rights act that seeks to protect forest land and settlers. Ramesh, who has scrapped or delayed clearance for some 100 mining projects, wants to protect India’s remaining forest land as part of a strategy to fight climate change. But that could mean giving up mining about a quarter of the country’s mineral reserves.
POSCO required 4,000 acres (1,600 hectares) of land in the eastern state, of which 2,900 acres is forested. Final clearances for acquiring the forested land had been given, but there has been little progress in land acquisition because of the protests. Top steelmaker ArcelorMittal is also battling delays from allocation of mining licences and protests by villagers in eastern India. POSCO announced in January it planned to invest more than $7 billion in a new plant in southern India.