Facing many hurdels in its ambitious project to get under way in India, the South Korean steel giant Posco, has now put on hold its USD 12 billion steel project in Odisha, due to delays in various regulatory approvals. “We are tentatively suspending the Odisha (India) project due to lack of any progress,” Posco Chairman and CEO Kwon Oh Joon said.”Business conditions at home and abroad have changed due to a drop in global steel demand, growing deficit of subsidiaries, which have led us to come to a conclusion that we must step up our reform efforts,” he said at an investor event in Seoul .
It may be recalled that Posco’s 12-million ton-a-year Odisha project, which was the nation’s biggest foreign investment, failed to take off since 2005 because of opposition from local farmers and the failure to secure iron ore mining leases, initially promised for free to the company.
The steel major’s India spokesperson said however that it is not quitting Odisha , even as its over USD 12 billion project has been hanging fire for almost a decade. “That is not the fact. Due to no progress in the project area, much of office space was lying vacant in Odisha. It was decided to renovate the office space to a smaller area,” a Posco spokesperson told reporters on being asked whether there are plans to exit 12 million tonne (MT) Odisha project. Posco has been facing problems regarding its mega project in Odisha on account of delays in raw material security, land acquisition as well as other clearances.
The company is reducing its unused office space and other expenditure that can be stopped as part of a massive global cost restructuring programme, said a person in the know of developments. Posco has announced the restructuring programme, which involves reducing “30 per cent of the overseas business within the Group”. This will involve “early turnaround of newly run overseas business” as well as “dispose/liquidate/merger non core business within the group”.