(Bloomberg) — Posco is backing away from a planned $12 billion steel complex in India, which has been stalled by local disputes and lease issues since it was proposed a decade ago, people familiar with the development said.
South Korea’s biggest steelmaker has tried to get back the money it gave to government agencies in the eastern state of Odisha to secure some of the land, and for railway connections, according to three people and company letters seen by Bloomberg. Six of 13 employees at Posco’s Indian unit overseeing the project have also “voluntarily” resigned, spokesman I.G. Lee said in a text message.
“Still, we are on and waiting for further progress,” Lee said about the proposed steel complex. He isn’t aware of any letter from Posco seeking a refund, Lee said.
Posco’s Odisha project, the nation’s biggest foreign investment, has failed to take off since 2005 because of opposition from local farmers and the failure to secure iron ore mining leases. The steelmaker was able to overcome local resistance and get the state to acquire about 2,700 acres (1,093 hectares) of land for the first phase.
Securing supplies of iron ore, a key steelmaking raw material, has proved tougher. The federal government in January decided it would auction all mineral resources, including iron ore and limestone. That means Posco will now have to bid for securing iron ore blocks, which will increase costs.
‘Long Wait’
“Posco has waited for a very long period and probably they thought it was time to take a final decision on their future course,” said Jagannadham Thunuguntla, head of fundamental research at Karvy Stock Broking Ltd. “When Posco first proposed the investment, it was very big and was considered a game changer. But now already a lot of money is coming into India so any decision by the company may not matter much to the market.”
Posco last month decided to shut its engineering and construction unit in India after failing to win orders, according to one person, who asked not to be identified as the matter is private, and letters sent to three employees. The Gurgaon-based unit, which designs steel plants, asked 35 employees, about half its workforce, to resign by Feb. 26.
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