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Green bench rejects Posco’s Orissa project-Jacob P Koshy & Ruchira Singh

South Korean steel maker Posco may have to start its bid to enter India from scratch, letting six years of preparatory work go to waste. A top tribunal has cancelled environmental approvals given by the government last year for the company’s $12 billion (around Rs61,440 crore today) steel plant in Orissa and ordered that the environment ministry review the entire project afresh.

The tribunal said environmental clearances have been accorded in a piecemeal fashion and that a true account of the ecological impact of the project in its entirety may be different from the current evaluation. Posco had been given the final clearance last year by the environment ministry led at the time by Jairam Ramesh.

“The MoEF (ministry of environment and forests) shall make a fresh review of the project...(the) final order dated 31 January 2011 made by the MoEF (clearing the project) shall stand suspended till such fresh review, appraisal by the EACs (expert appraisal committee) and final decision by MoEF is completed,” the National Green Tribunal, a statutory body that specifically looks at environmental issues, said in its order.

The plant is to be constructed in east Orissa on more than 4,000 acres, 75% of which is forest land, and will involve the largest foreign direct investment in India to date. It has become a symbol of the social, environmental and regulatory disquiet engendered by big industrial projects in India, while undermining the country’s thrust for faster economic growth as it seeks to lift people out of poverty.

Activists say the case is emblematic of an opaque land acquisition process and insufficient analysis of ecological impact. Industrialists say it typifies the hazy, shifting rules that characterize the process of environmental clearance in the country.

The development could be embarrassing to the government, analysts said. Earlier this week, Prime Minister Manmohan Singh told his South Korean counterpart Kim Hwang-sik that the Indian government “is keen to move forward with the Posco project and there is some progress in this regard. I believe India is a stable and profitable long-term investment opportunity”.

“The government should have long-term and transparent policies if India has to seek foreign investments for double-digit GDP (gross domestic product) growth,” said Associated Chambers of Commerce and Industry of India secretary general D.S. Rawat. “Otherwise, confidence among foreign investors will be undermined.”

Environment minister Jayanthi Natarajan denied the decision was a setback for the government and said that her predecessor Ramesh had given clearance to Posco after a careful evaluation. He imposed “very strict and very, very transparent procedures and systems, which have been put in place”, she told news agency PTI.

Posco was guarded in its response. “Before we get the full copy of the National Green Tribunal’s judgement, we do not have a statement to make,” said I.G. Lee, general manager of the corporate relations department at Posco India Pvt. Ltd.

“The ministry of environment and forests will take its own action on the National Green Tribunal’s report. Posco India has to wait for that,” Lee said.

Earlier this month, Posco had asked Orissa to hand over more than 2,000 acres of government land so that the company could start construction of the first phase of the steel plant involving a capacity of four million tonnes per annum (mtpa), Lee had said earlier.

The order specified that such land acquisition would stop as environmental clearances were only accorded for infrastructure built to generate 4 mtpa of steel, and that various commissions didn’t consider the project in its entirety, that of a 12 mtpa steel plant that would also involve construction of a captive port and mine.

“The MoEF and particularly the respective EACs failed to consider the environmental and social implications of such a large project and relied mainly on the assurances given by the project proponent,” the tribunal said. “Clarifications were, though, sought by EACs, but there was limited follow-up action and consideration to the points raised during the public hearing.”

Posco’s original plan, conceived in 2005, was for a 12 mtpa plant to be built in three phases at an estimated cost of $12 billion. Since then, it has been stuck over regulatory and social issues. Posco has insisted that it hasn’t revised or shelved its original plan.

Shankar Gopalakrishan, who has been involved with the campaign against the project, said this wasn’t necessarily the end of the road for Posco. He said Posco now has to choose whether it wants a 4 mtpa plant or a 12 mtpa one. There are additional studies such as those on the discharge from the project and access to water that the tribunal has directed the government to look into.

If it’s sticking with the 12 mtpa plant, Posco will have to approach the project afresh, he said. “Either way, it will take a significant amount of time, but it’s wrong to understand that the project has been quashed.”


Nikhil Kanekal and PTI contributed to this story.