Behind Posco's decision to exit $5.3 bn Karnataka project

It turns out that South Korean steel behemoth , The Pohang Iron & Steel Company or Posco, has decided to exit Karnataka more because of its inability to get iron ore mines in the state, than issues over land acquisition.

The company had been planning to set up a Rs 32,336 crore, six million tonne per annum (MTPA) steel mill in Karnataka's Gadag district.
 
In a repeat of the deadlock it has faced for many years in Orissa, Posco was indeed having problems getting land in Karnataka too. The state government was in the process of acquiring 5,632 acres of land for the plant, some of which was said to be owned by a local religious mutt. The head of the mutt led the protests against the acquisition, which complicated the situation.

The previous BJP government, under then Chief Minister B.S. Yeddyurappa, had signed the deal with Posco, and pursued it, as it had the potential to create 20,000 jobs. The then Industries Minister Murugesh Nirani had taken personal interest in bringing Posco to the state, officials unwilling to be quoted said. The new Congress government too has not opposed the project.

But assuring supply of iron ore is another matter.

With the Supreme Court closely monitoring mining activities across the country and particularly in Karnataka, officials say, the last thing the government wants is to be seen favouring one particular company while recommending mining leases.

The apex court had initially cancelled all the mining licences in Karnataka's Bellary district but has since allowed a good number of them to reopen under its close supervision. The government will have to follow due process of law in dealing with mining applications.

However, a top government official expressed satisfaction over the progress made by Arcelor Mittal India Ltd and Tata Metaliks Ltd in setting up steel mills in Karnataka.

Arcelor Mittal is planning a six MTPA plant with an investment of Rs 30,000 crore in Karnataka's Bellary district, where it has 2,569 acres of land. Tata Steel has proposed a six MTPA project which an investment of Rs 35,000 crore in Haveri district, and has bought 2500 acres of land.

"We are happy both Tatas and Arcelor Mittal have got the land, and all the clearances. They, of course, are waiting for their allotment of iron ore mines," the official said.

Arcelor Mittal was the world's top steelmaker in 2012, producing 93.6 million tonnes, while Posco was at the fifth place with 39.9 million tonnes, according to the World Steel Association statistics. Tata Steel was at in 11th place with 23 million tonnes.