Reuters | Oct 18, 2010 | 8:32pm IST
A majority of an Indian review panel recommended on Monday that environmental clearances given to South Korea’s POSCO for a steel mill in Orissa be cancelled because the project could violate forest laws. The panel’s findings are not binding, and a final decision on what has come to be seen as a test case of India’s investment climate lies with Environment Minister Jairam Ramesh.
The panel recommended that POSCO be asked to carry out a fresh environmental impact assessment for the $12 billion mill, touted as India’s biggest foreign direct investment, which has already been delayed by more than three years. The South Korean company is among several corporations, including London-listed Vedanta Resources, whose Indian projects have come under scrutiny by an environment ministry that has been tightening rules — often bringing it into conflict with other government departments pushing for rapid industrialisation. A POSCO official in India declined to comment.
In August, India’s environment ministry ordered a halt to all work on the project, including land acquisition, while the panel investigated if the Forest Rights Act that seeks to protect forestland and settlers had been violated. POSCO was scheduled to begin production from its plant in Orissa’s Kujanga region by the end of 2011.
The memorandum of understanding for the mill was signed in June 2005 that also included captive iron ore mining rights in the state’s Khandadhar area. But the world’s third-largest steelmaker faced delays arising from protests from local residents who stand to be affected by the plant as well as the environment ministry probe.
The four-member panel gave two separate reports, with only one member saying POSCO should be allowed to keep the environmental clearances already granted whilst it carried out a new impact assessment. "Though there are two different reports they have common concerns," Ramesh told reporters. "Both reports say there are weaknesses and infirmities in the way the forest rights issue is being implemented." He gave no deadline for a final decision on the matter.
The country’s Forest Advisory Committee will examine the panel’s reports on Oct. 25 before Ramesh makes a decision. In August, Ramesh’s ministry rejected Vedanta’s plans to mine bauxite in Orissa over environmental concerns and its impact on the lives of primitive local tribes. But Ramesh said POSCO’s project was "fundamentally different" from Vedanta. The panel’s reports also said POSCO’s mill would not displace tribes’ people.