 "Posco plods through despite setbacks")
"We came to India in 2004 on the invitation of Tata Steel to set up a steel plant in a joint venture. But the talks failed as Tata Steel was not willing to concede majority stake to us. Then we started negotiation with the Odisha government for setting up an integrated steel plant on our own," says a senior official of Posco. The South Korean company, of course, had come on a recce before-in the 1990s. However, it could not take a call on setting up business then. "The market, at that time, was not good, though it would have been much easier to acquire land," adds the official, referring to the difficulty the company faces in acquiring land in the state.
Long wait
Posco had signed a memorandum of understanding (MoU) with the Odisha government in June 2005 and intended to start work the next year. However, as of 2013, the company has not been able to take possession of a single inch of land. The state government and the Industrial Infrastructure Development Corporation of Odisha, which have been carrying out land acquisition haltingly due to stiff resistance from locals, claim to have acquired 2,100 acres till date and have assured to take hold of the rest 600 acres to help the company start work on the first phase in another couple of months, according to a status report submitted to the inter-departmental ministerial committee of the Centre this week.
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However, land is not the only obstacle in its way. Posco has to overcome the hurdles in getting captive mining rights, the final environmental nod from the Green Tribunal, and resolving issues related to sourcing of water.
But Posco is not sitting on its haunches while the clearances are pending. The company, which has moved its chairman & managing director's office from Bhubaneswar to New Delhi for better monitoring of its projects in other states, has its hands full through a spate of small investments in downstream steel projects. It has set up specialised steel units in Maharashtra, and processing centres at Delhi, Pune, Hyderabad and Chennai.
The continuous galvanised line (CGL) and cold rolling mill (CRM) (under construction) at Mangaon in Maharashtra are designed to cater to the demand for high-quality steel, ranging from coated steel to cold-rolled products which are required by a variety of industries such as construction, home appliances and automotive. The CGL plant, built at an investment of $240 million, was completed in May 2012, while the CRM plant is expected to go on stream in June 2014.
Sighting opportunity
Besides, Posco's first electrical steel plant in India, Posco Electrical Steel India, being built in the Raigad district of Maharashtra, is scheduled for completion in October 2013. The plant, with an annual capacity of 300,000 tonne, will provide cold-rolled and non-grain-oriented electrical steel (CRNGO) for use in home appliances, automobiles and so on.
Posco also has four processing plants located strategically across the country, which serve as service centres to provide value-added service to Indian customers. These units receive steel of various categories from Posco Korea and customise the products for Indian customers.
Posco's business turnover so far in the country has reached approximately $630 million (processing centres $500, CGL $130). "However, because CGL was not fully operational as it is in its initial stage, we did not make profit last financial year (2012-13)," says a company official.
Posco's other projects in India include an integrated steel plant in Karnataka and a joint venture with Steel Authority of India in Jharkhand. However, the project is at a stalemate with both the partners wanting to own a majority stake. The Karnataka plant is on hold too "because of the political uncertainty in the state", Posco India Chairman-cum-Managing Director Yong Won Yoon said recently. The company had paid about Rs 60 crore to the Karnataka government in 2010 as initial payment for land acquisition for the 6-million tonne plant.
Meanwhile, Posco has received feelers from Uttam Galva Steel to jointly set up an integrated steel plant with an annual capacity of two million tonne at Satarda in Maharashtra. This move, if fructifies, will also see two global steel makers, Posco and ArcelorMittal, which holds 33.80 per cent stake in Uttam Galva, coming together for a project in India.
Yoon, who has held preliminary talks on the project with Uttam Galva Chairman & Managing Director Rajinder Miglani in Mumbai recently, says, "Uttam Galva is keen to set up a steel project with us in the Konkan region. They have clear possession of the land and the site is close to port facilities and iron ore mines in Goa. They have offered us about 1,700 acres, which can accommodate a steel plant of 3-million tonne capacity."
But the South Korean major does not want to lose sight of its Odisha project in the flurry of investment plans for India. "We are considering the Uttam Galva proposal. But our priority is the Odisha project," says Yoon.
He says, "Most of the downstream projects we have set up in the country have been done keeping an eye on the Odisha plant. We are now bringing steel from Korea to feed these processing and specialised steel units. When the Odisha plant comes up, we will source steel from there".
Yoon does not hide the motive behind the company's India foray. Ask him what made Posco come to India or especially Odisha, the reply comes promptly: "Market and raw material".
In fact, these clear thoughts have made Posco stay put in Odisha despite all the hurdles.
The South Korean ambassador to India, Kim Joong- Keoun, during a recent visit to Odisha sounded optimistic when he said, "We are hopeful of starting work on the Posco project this year". Though he added, "It has been much delayed by Korean standards. The Koreans are very quick".
POSCO IN INDIA
PROCESSING CENTER: Delhi, Pune, Hyderabad, Chennai
STEEL PLANTS: Karnataka*, Jharkhand*, Odisha**
SPECIALISED STEEL PLANT: Raigad
*on hold, **proposed