Posco may pull plug on Orissa project

Infrastructure a hindrance, says steel major

Posco, the Korean steel maker, has said that lack of proper infrastructure in Orissa could hinder its plans to set up a 10 million tonne integrated steel plant in the state.

Posco, along with BHP-Billiton, recently put forth a proposal to invest $8.4 billion for setting up steel making facilities and development of iron ore mines in Orissa.

Tae-Hyun Jeong, director, corporate strategic planning, overseas steel plant project, said, "Although there are around 13.5 billion tonne of iron ore reserves in Orissa, the state does not have a proper port and infrastructure facilities are very poor. We have proposed to the state government to provide good infrastructure facilities and we will take a final decision on our India plans depending on what the Indian government is willing to provide."

The company will not make any investment for developing the infrastructure in the state, he added. In a parallel development, Arcelor, world's largest steel maker, has expressed interest to set shop in India.

Alain Davezac, senior vice-president, international business development, Arcelor, said, "India is definitely on our strategic agenda and we are looking for opportunities here. However, we have yet not finalised any plans for India and will looking at extending our alliance with Tata Steel and Nippon."

Arcelor has a tripartite agreement with Tata Steel an Nippon Steel to provide technological assistance for manufacturing auto-grade steel. The French company is looking at distribution ventures in India, Davezac added.

If Posco goes ahead with the project, it will invest a total of $6.2 billion in the project, while the balance investment will be made by BHP-Billiton.

The company is looking at completing the first phase of the project by 2009, which will include 3 million tonne per annum of steel making capacity and around 5 million tonne per annum of iron ore development. The Korean steel maker is also looking at increasing its direct imports of iron ore from India in the long term.

"Currently we import around 2 million tonne of iron ore from India, which is a very small part of our total requirements. We would be keen to source more ore from India in the next few years," Jeong said.

Posco is also evaluating the possibility of setting up steel manufacturing facilities in Brazil. While Jeong did not specify that the investment in Brazil would be made at the cost of the Indian venture, he said the Korean major would take a final decision based on the kind of support and facilities that the countries offer.