Ramesh paves way for Posco's Rs 11K crore bonanza

Don’t believe me? Read on


Prasanna Mohanty | February 1, 2011

Nothing can be as absurd as the fresh environment clearance granted to the Posco project in Orissa on Monday.

Look at the order. It says:

* Environment clearance for the steel-cum-captive power plant is being given with 28 “additional conditions”;

* Environment clearance for the captive port is being given with 32 “additional conditions”;

* Diversion of forest land will be granted on the condition that the Orissa government gives “a categorical assurance” that no forest right claim exists and

* Should there be shortfall of water at Jobra barrage for irrigation, the company will voluntarily sacrifice water intake.

The “in principle” environment clearance granted to the project in September 2008 had 13 conditions attached to it. Additional 15 conditions were added to it when the “final” clearance was given in December 2009. The latest “final” clearance is the second one after Ramesh issued a stop order in August 2010.

Add up and you arrive at a list of 89 conditions (minus the water condition which is part of the set up 28)!
Ramesh needs to be asked some tough questions.

(i) What kind of “final-final” clearance is this that carries 89 pre-conditions?

(ii) Why clearance for a captive port (with 32 additional conditions) months after MoEF’s expert teams questioning Orissa government on the need for a captive port at a time when (i) Damra port has come up in the vicinity and (ii) Paradip port is being re-developed bang at the project site!

(iii) The stop order of August 2010 was issued because MoEF expert teams provided irrefutable evidence that forest rights of non-tribal traditional forest dwellers of the area had been denied. Why seek “assurance” from state government when MoEF’s “binding guideline” of 30 July 2009 which said compliance of forest right was mandatory for according clearances?

(iv) It is well known that Jobra barrage in Cuttack provides drinking water and irrigation water to Cuttack, Bhubaneswar and nearby areas. Supply of water is not adequate now. Allowing diversion of water to Posco’s project more than 100 km away will only aggravate it. So, why allow it and then put a condition of “voluntary sacrifice”? What happens when supply is short of drinking water need of Cuttack and Bhubaneswar? Will Posco plant be shut?

But more than these questions that arise out of the final-final” order of Mr Ramesh, there are a few fundamental ones that neither he nor the government (both central and state) has bothered to look into. One of those is the following:

State government’s MoU (which has, incidentally, lapsed and not renewed yet) with Posco proposes export of 400 million tonne of iron ore to its plants in South Korea. This is in addition to 600 million tonne of iron ore that the plant is seeking for producing 12 million tonne of steel annually, for which it has been prmosed captive mines.

Calculate Posco’s windfall gain by exporting 400 million tonne of iron ore which costs anywhere between Rs 3,000 to 7,000 a tonne in international market. POSCO will be paying only a nominal Rs 27 a tonne as royalty to the government. As Karnataka Lokayukta Santosh Hegde had calculated, extraction and transportation will cost will add up to around Rs 200 a tonne. Let us take total input cost is Rs 250 a tonne.

So, the windfall gain to Posco will be 400 million multiplied by Rs 2,750 (taking the price at lowest band, Rs 3,000 a tonne) and it comes to Rs 11,000 crore!

By giving the clearance Ramesh has paved the way for Rs 11,000 crore bonanza for Posco.

Posco will be investing Rs  51,000 crore, of which it will recover Rs 11,000 crore in export of iron ore alone.

The MoU does talk of "open market" arrangement for export of iron ore, but this makes little sense since Posco will be given captive mines as per the same MoU. Nothing stops Posco from sourcing the ore from its captive mines.




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