Dillip Satapathy: The steel frame still works

BACKSTAGE

Subas Pani

Orissa's historic $ 12 billion MoU with South Korean steel major Posco for setting up a 12 million tonne steel plant at Paradip is the single-largest foreign investment in the country.

And while the credit for this clearly goes to Chief Minister Naveen Patnaik, the state's bureaucrats led by chief secretary Subas Pani played a key role, bringing the project back from the brink on a couple of occasions and yet getting a good deal for the state.

An IAS officer of the 1972 batch, Pani took over as chief secretary in September 2004 after a long stint at the Centre where he was deputy election commissioner and then development commissioner (handloom) in the ministry for textiles.

In the early 1990s, when few bureaucrats knew how to operate computers, Pani was using them regularly and, when various industrial houses showed interest in setting up plants in Orissa to take advantage of the commodities' boom, Pani reviewed the progress of these projects on almost a daily basis.

While Posco, which had tied up with BHP Billiton to invest in Orissa in early 2004, got cold feet about investing in the state due to the poor quality of infrastructure there and talked of moving to Brazil or China, Pani got the president of Posco, Chang Oh Kang, to come to Orissa in November.

During the visit, Kang declared that the company was committed to the Orissa project and that the state government was very cooperative with the company.

Pani then set up a high level working group to pilot the proposed mega steel venture "" the group was headed by Orissa steel and mines secretary and other members included the industry secretary, the revenue secretary, the water resources secretary, the director of the state environment department, and the chairman and managing directors (CMD) of Industrial Infrastructure Development Corporation of Orissa (IIDCO), Grid Corporation of Orissa (Gridco), and the Orissa Mining Corporation (OMC).

Pani, along with the mines secretary Bhaskar Chatterjee and energy secretary R N Bohidar, then visited South Korea in the last week of December 2004, surveyed the facilities at Posco's steel plants at Pohang and Gwyangyang and got to see the facilities managed by the company there including the ports.

However, negotiations soon reached a flash point when the two parties fell out on the issue of iron ore exports.

With Orissa government rejecting Posco's demand for 400 million tonnes of iron ore exclusively for export purposes, over and above its captive requirement of 600 million tonnes, Posco left the negotiation table on the eve of first schedule for signing of MoU slated for April 14.

"That was the most difficult period", says an aide to the chief secretary engaged in the negotiation process.

After a brief cooling off period, both parties, however, got back to the negotiation table, and following some hard bargaining by Pani and his team, the company brought down its demand for ore to 600 million tonnes from the earlier 1 billion tonnes.

While Posco agreed that there would be "no net export of iron ore" from Orissa, it said it would "export some iron ore with high alumina content and import equal quantity of ore from Brazil to improve the efficiency of the proposed plant".

This threw up further complications as neither party could agree on the swap ratio. While Posco demanded a swap ratio of 30 per cent, Orissa insisted on limiting it to 15 per cent.

Finally, Orissa gave in to the Posco's demand clearing the last hurdle in the path of signing the MoU.

Given the opposition to the project, especially from local companies who saw their interests being hurt, the entire negotiation was very hush-hush.

So much so that the copies of draft MoU circulated to the ministers in the meeting of the high powered project clearance committee (chaired by chief minister a couple of days before the signing of the MoU) were collected back from them once the meeting was over "" no one wanted to take a chance with the details leaking out as was certain to happen if the papers left the room.

Clearly Orissa's steel frame is not as rusted as is generally believed.