India approves long-delayed $12 billion POSCO steel milladmin
India’s environment ministry approved on Monday South Korean POSCO’s plans for a $12 billion steel mill, a boost for the foreign investment climate in Asia’s third-largest economy after several setbacks for big ticket industrial projects.
The long-delayed clearance for India’s biggest foreign direct investment (FDI) follows a year in which Environment Minister Jairam Ramesh has blocked several projects, raising criticism he was jeopardizing India’s growth story.
India, one of the world’s fastest growing major economies, needs foreign capital to boost infrastructure and allow its economy to grow at near double digits. But projects have met with protests from largely poor farmers in this densely populated country.
“It’s very good news that this issue has now been settled,” said Taina Erajuuri, Helsinki-based portfolio manager at FIM India, which owns about $150 million worth of Indian shares.
“India, unlike China, is a very difficult country for foreign companies to get approvals, specially environmental approvals. Many foreign companies want to come to India but the country is very bureaucratic, to put it mildly.”
The mill in eastern Orissa state has been delayed by criticism it would ruin lives of thousands of poverty-stricken people, who say the plant will disrupt their betel leaf plantations and forest-based livelihoods.
“Undoubtedly projects such as that of POSCO have considerable economic, technological and strategic significance for the country,” the environment ministry said. “At the same time, laws on environment and forests must be implemented seriously.”
The ministry attached a series of additional conditions for POSCO, but analysts said they were not major obstacles. A government panel had earlier said there were no ecological concerns over the plant.
POSCO is among several corporations, including Vedanta Resources, which have come under scrutiny from Ramesh, putting his ministry in conflict with others in the government who are pushing for rapid industrialization.
A series of corruption scandals has shaken the government of Prime Minister Manmohan Singh and a recent minor cabinet reshuffle saw several ministers’ portfolios change, but Ramesh stayed on as environment minister, indicating his influence.
The ruling Congress party head, Sonia Gandhi, is keen to win over farmers hit by big projects at well as ensuring industrial jobs are created — a fine line that may have helped create regulatory uncertainty before state elections this year and a general election in 2014.