Posco begins hunt for fresh location to set up plant

Move triggered by Centre’s decision to divest stake in Rashtriya Ispat Nigam

The Centre’s decision to privatise Rashtriya Ispat Nigam (RINL) has prompted South Korean steel major Posco to explore new locations for setting up its steel plant.

People in the know said the move to privatise RINL comes as an additional barrier to the steel major. “Posco has been exploring investment in India like other global steelmakers, such as Arcelormittal, but has not made progress,” they said.

Now, the Andhra Pradesh government has invited Posco to set up a plant in Krishnapatnam, though no decision has been made. “Posco is also exploring other locations,” indicated the people.

Posco has been trying to set up a steel plant in India since the last 16 years. It had signed a memorandum of understanding (MOU) to set up a 12-million-tonne plant in Jagatsinghpur district, Odisha. However, land woes and a change in mining policy derailed its plans.

Last year, however, Posco’s plans appeared to be making headway as talks with RINL were held for investment in its land, facilitated by the steel ministry. However, with the privatisation of RINL, it’s back to square one for the global steelmaker.

On February 3, the Department of Investment and Public Asset Management secretary had tweeted that the CCEA (Cabinet Committee on Economic Affairs) had, on January 27, given an inprinciple nod for 100 per cent strategic disinvestment in RINL (along with management control) by way of privatisation.

Employees’ unions, however, have been agitating against the privatisation of RINL. The AP government, too, asked for reconsideration.

In February, Chief Minister Y S Jagan Mohan Reddy had written to Prime Minister Narendra Modi to reconsider disinvestment and explore other opportunities to put the plant back on track. Suggestions included allotment of captive iron ore mines and financial restructuring.

However, sources in RINL indicated that privatisation plans were on track.

For Posco, it means the wait drags on. In the first phase, Posco is eyeing a steel plant capacity of 4 million tonnes.

Posco had signed an MOU in 2005 with the Odisha government for a mega steel plant. However, till 2013, the state government had managed to transfer a part of the land requirement.

Then in 2015, the Centre amended the mining laws, which made it mandatory for companies to go through the auction route for captive mines, as opposed to an earlier nomination route.

The same year, Posco suspended its project in Odisha owing to the lack of progress.

Delays in land acquisition and mine allocation had stalled other projects, too, like that of Arcelormittal.

The world’s leading steelmaker had signed an MOU for setting up mega steel plants in Jharkhand and Odisha in 2005 and 2006, respectively. However, none of them took off.

Finally, it made a major entry into India in December 2019, with the acquisition of Essar Steel under the insolvency law.

Stressed assets have been generating interest from investors, thanks to the upturn in the steel market. According to an ICICI Securities report, the current spreads for Indian players have crossed CY09 highs.