Will India’s biggest FDI materialize?

POSCO's proposed unit in Orissa is the biggest FDI of India

More than 5 years ago, when the Govt. of Orissa signed the MoU with the South Korean Steel giant POSCO, the people of Orissa were ecstatic and dreamt of a new beginning in the industrial sector of the state. Such a project was unique as around Rs 51,000 crore money was proposed to be invested making it India’s biggest FDI. Around the same time the Naveen Pattnaik govt. signed some 50 odd MoUs and naveen became a messiah for the public in Orissa. Till now his industrial drive is being touted as his and his party BJD’s success story (It’s a different story that most of the big projects have not moved an inch forward since then). The initial euphoria was expected as Orissa had just moved away from Congress’ misrule which wasn’t able to bring any new industry and rather was responsible for shutting down many existing small and middle industries.

Today after 5 years, the POSCO project’s future is marred by petty politics and complex interpretation of the forest laws. Recently the Ministry of Environment and Forests(MoEF) 4-member committee headed by Meena Gupta, former environment secretary, gave 2 contrasting report that pushed the future of the project into darkness. As no large political leader involved with the issue (unlike Vedanta’s Niyamgiri project which has now become Rahul Gandhi’s pet issue), this news wasn’t covered by the national media. This post will try to throw light on the issue and try to interpret the indications to seek the answer to the question in the title.

The 4 member committee (members: Meena Gupta, head of the committee, Urmila Pingle, Devendra Pandey and V. Suresh) empowered by MoEF submitted 2 separate reports on the 18th October. While chair Meena Gupta in her report asked for conditions to be added to the existing clearances but NOT to cancel the clearances, the other 3 members in a separate report suggested that approvals should be canceled because of “flaws in the studies, and shortcomings in the clearances granted”. The 3 members strongly disapprove the idea of POSCO building its own port at the same time states that the govt. of Orissa helped the company by giving illegal clearances. It is to be reminded that this committee was formed by MoEF after it had asked the state govt. to stop all the work on the POSCO site on the Ausgust 5 when the govt. had started surveying the land to acquire it for POSCO.  It was around the same time when MoEF had revoked the clearance of Vedanta for its Niyamgiri plant.


Meena Gupta


Coming back to the MoEF committee report, as the majority view suggest to revoke POSCO’s clearances the future of the project looks bleak which will be decided on October 25th when the Forest Advisory Committee meets. What makes the issue more complex is the statements coming from different parties to the issue. The 3 members who reported against POSCO’s clearances accused Meena Gupta of giving a pro-POSCO report to make Govt. of Orissa happy as she is an IAS of Orissa cadre. At the same time Meena Gupta met Jairam Ramesh and told him that her report should be considered as she was the head of the panel. The local media reports Jairam to be ‘soft’ towards the project as he had said off the record that POSCO and Vedanta issues are two different cases. So is there any hope left? Or is it the end for POSCO in India? To answer this, we have to analyse different aspects from the past, present and the future.

The case is unique indeed. The Orissa govt. chose the particular place for the plant as most of it were govt.’s land. Still it has to face stiff resistance from the locals who are farming illegally on the govt. land. While the govt. and the company is ready to compensate even the govt. land encroacher, several farmers aren’t ready to leave. Other than that Forest laws violation is another accusation that the POSCO is facing. But the real problem is the indecision at the part of the govt. especially the central govt.

At first, the project’s progress was monitored by the PMO itself even when the state congress leaders were opposed to it. The South Korean President was invited as chief guest for India’s republic day celebrations to assure South Korea that Govt of India will take steps to make sure that POSCO project materializes. But the govt. never set a time frame to achieve goals and it was shocking when all of a sudden in the August 2010, MoEF stalled the project. While Prime Minister Manmohan Singh is to visit Seoul in this November, he may have to answer some tough questions and reminded of his assurance. And Jairam’s off the record statement that POSCO and Vedanta are two different cases is quite significant from this point of view.

The future aspect of this particular investment will also be in front of the govt. If this investment fails, it will surely affect the future investment projects. Orissa is already facing the outcomes of the slow progress of large investment projects. As Arcellor-Mittal, Vedanta projects along with that of POSCO has not progressed for last 4-5 years, no new projects are coming to Orissa. With the news coming that Gujarat govt. is trying to woo Vedanta to shift their project to Gujarat and some other states like Jharkhand, Chattishgarh interested in POSCO’s project, Orissa will never want to loose these investments. The POSCO bosses are also not happy as the values of their shares are decreasing day by day because of the uncertainities over the Orissa project.

The central govt. understand that they have messed up the issue and with PM visiting South Korea, it may not take any negative decision. In the October 25th Forest Advisory Committee meeting they may just take a diplomatic decision that will delay the progress again and the question “Will India’s biggest FDI materialize?” will remain.


2 thoughts on “Will India’s biggest FDI materialize?

  1. sujeetpillai says:

    This is getting plain old irritating. If the MOEF want’s to review and reject each and every clearance given by state govt.s they should just make it mandatory to get MOEF clearance rather than allow state govt.s to give clearances.

    It seems quite obvious that there is a political angle to the squabbles over the clearances.

    “Mera clearance clearance, aur tera clearance, paani!”

    Just another way to slow down development in our country.

  2. I have to agree with Sujeet. This is plain irritating.

    Just clear the damn thing! Or if you dont want then atleast dont keep it hanging ( although, that would be the most unfortunate! )

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