POSCO scraps proposed 6-MT steel project in Karnataka

POSCO scraps proposed 6-MT steel project in Karnataka

Steel major POSCO today announced it has decided to scrap the proposed 6 million tonnes steel plant in Karnataka, following long delay in land acquisition and adverse market conditions.

"With the given market conditions and significant delay in acquiring the required land in Gadag, we have decided to close our proposed 6-MTPA (million tonnes per annum) steel plant in Karnataka," POSCO India Chairman and Managing Director Yong Won Yoon said in a statement.

"We highly appreciate the Industries Department (Government of Karnataka) and KIADB (Karnataka Industrial Area Development Board (KIADB) for their co-operation and cordial support in this regard," Yoon said.

"In future, if we get an attractive business proposal from the state, we may consider it and return to Karnataka,” the POSCO India CMD said.

POSCO had signed an MoU with the Karnataka government at a Global Investors Meet in Bengaluru in June, 2010 to set up a steel plant with annual production capacity of 6 million tonnes in the state, the company statement said.

Subsequently in January 2011, POSCO finally zeroed in on Gadag to set up the proposed steel plant and notified KIADB accordingly, it said.

The hearing was held with the land owners in June, 2011. However, progress on land acquisition was held back due to agitation by some farmers and religious leaders and finally, land acquisition was halted in July, 2011.

In addition, the mining scam in the state made the project progress even "stagnant", the statement said.

Hence, considering the "significant delay" in the project and inability to get land in Gadag, POSCO finally decided to close the project in Karnataka.

"Consequently, in June 2013, KIADB and POSCO cordially agreed to end this project. However, both will positively consider any good future opportunity for investment," the statement said.

On July 1, 2013, KIADB officially returned Rs 60 crore to POSCO, which was deposited as initial payment for land acquisition in 2010, it added.

Former Karnataka Chief Minister B S Yeddyurappa, under whose tenure Posco had signed the memorandum of understanding for the project, said other industrialists also want to withdraw their projects.

Yeddyurappa said he would raise the matter in the state assembly during the budget discussion with the aim of trying to bring investors back to the state.

According to Posco, it was refunded Rs 60 crore on July 1 from the Karnataka Industrial Areas Development Board (KIADB), which was acquiring land for the proposed project on behalf of the state government. The money was deposited as an initial payment for land acquisition in 2010.

"We highly appreciate the Industries Department (GoK) and KIADB for their cooperation and cordial support in this regard," Posco India Chairman Yong Won Yoon said.

Besides delays in land acquisition, another issue for the South Korean steel major was securing a captive iron ore mine in Karnataka to run the proposed steel mill.

The Supreme Court, while lifting the mining ban in the state in April, had ordered an auction of all cancelled mines. Posco would have had to compete with other claimants, including JSW Steel and ArcelorMittal, for a captive iron ore mine in the state.

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