'The villagers don't have a choice'

POSCO UPDATE PART-III

Posco-India Chairman and Managing Director Soungsik Cho has learned the hard way that "social, political and economic environment is very different" in India.

Since he took over as CMD in April 2006, Cho says he has realised that implementing a project here is extremely difficult. But "day by day, we are learning and improving our approach to solving various problems" and "we are very near a final solution", says the South Korean executive.

The $12-billion integrated steel project is a year behind schedule because of local opposition that has stalled land acquisition. Coupled with this is the legal problem over its forest clearance.

Although Cho tends to get exasperated by "usual misconceptions and suspicions" about the project, he takes pains to explain the controversies over the South Korean project to Latha Jishnu

Why do you think there is so much opposition to your project?

I think the past experience has affected our project. I understand there has been poor relief and rehabilitation and bad mining practices in the past. Besides, ours is a huge project and Orissa has no concept, much less the experience, of implementing a project of this size.

How difficult is it dealing with these problems?

This is a deeply biased, chaotic society. It was a shock to me. I initiated the Posco project in Shanghai, and China is a difficult place to do business. But here the problems are very complex.

The Orissa government is struggling to solve them. Both the Union government and the Naveen Patnaik government are being very supportive.

What is Posco willing to offer the villagers who are refusing to part with their land?

It is incorrect to say that villagers are unwilling to part with their land. They have already agreed to do so in writing. The issue is they have high expectations on compensation and this needs to be negotiated.

Posco-India will honour the 2006 R&R (relief and rehabilitation) policy of Orissa. There will be benefits beyond this. The Rehabilitation and Periphery Development Advisory Council and the monitoring committee will ensure this is carried out in a fair and transparent manner.

The villagers say this will not compensate them for loss of livelihoods.

We understand concerns about loss of livelihoods. The company will prepare land for them to continue betel-leaf cultivation. In addition, we have guaranteed a job to one eligible member of each displaced family. These are just some of the components of the package.

There is opposition still. How will you meet the new deadline of April 2008 for starting work?

The situation is more hopeful now. In the first stage, we can begin construction on government land, leaving out the private land. That accounts for only 438 acres out of 4,004 acres. We will not give up.

Even if the villagers continue to resist?

They will accept our proposal. They don't have a choice, we don't have a choice. We will work out a suitable compromise.

But there is the forest clearance hurdle. The Central Empowered Committee of the Supreme Court has asked Posco-India to submit a composite forest diversion proposal (FDP) for mining and the steel project.

A composite FDP application is not feasible. It appears to have been suggested to delay the project intentionally. The steel plant is 300 km from the mining area. There is no ecological link.

And let me tell you that according to conditions laid down in the MoU, Posco has to award 50 per cent civil and structural contracts and 20 per cent orders for machinery in order to be recommended for a mining licence. This again is not possible without land for the steel plant. We hope the Supreme Court will decouple the application.

Let me ask you about one of the common suspicions: Why is it necessary to swap ore?

We have to swap because the high alumina content of the ore here will affect our productivity. We have to bring in low alumina ore from elsewhere. The MoU we signed caps this at 30 per cent. There is no question of exporting ore as has been alleged.

Posco's FINEX technology allows you to use high alumina ore. Do you need to swap?

Our FINEX technology can use more of such ore. But how much more we cannot say now. The logistics of swapping will amount to $30 per tonne. Why would the company spend unnecessarily on this? Swapping is our least preferred option.

How important is the Orissa project to Posco?

This project is part of Posco's global strategy. A developing market with huge iron ore resources is very attractive for us. We can sell steel to the domestic market and also export.