India has become even more crucial in Posco’s scheme of things after the birth of the Arcelor-Mittal conglomerate. The $22-billion Korean steel giant is also reportedly looking at consolidation, and on its radar are companies in China and India.

How are you planning to handle the delays stalling your investments?

Yes, there have been delays in getting the mining licence and acquiring land, but the Orissa government is supposed to recommend the prospecting licence (PL) to the Union government by September end. We hope to begin iron ore production from June 2010, six months before completion of the steel works.

We have already acquired 1,135 acres of encroachment-free land from IDCO (Orissa Industrial Infrastructure Corporation). For the port, committees for the Coastal Regulation Zone and the Environmental Impact Assessment have sent the proposal to the Centre. Our SEZ proposal is also pending. A meeting is likely to be held before October to consider these matters.

The progress is slow, but steady. We are slightly behind schedule. We did expect the PL application to be through by March 2006, but we plan to make up for the delay by applying directly for a mining lease as some of the areas shown to us have been well explored.

As for land, our total need is around 4,000 acres. Of this, 3,500 acres belongs to the government and 438 acres are private land. We had hoped to acquire all the land by next March, but there are delays due to the Kalinganagar incident (in which 11 people were killed in police firing while protesting against land acquisition). So, now we will process government land first. We will put off acquisition of the private land and start construction on the land acquired from the government by April next year.

There have been reports that you will fund the first phase of the project through equity infusion, while the rest will be funded through debt. How will the debt component be structured?

That’s not quite true. The first phase, too, will have both debt and equity funding. We are looking at a debt component of 60 per cent. Most of this will be funded from overseas through syndication, suppliers credit and through Posco Investment, a subsidiary based in Hong Kong. The first phase will see an investment of $3.7 billion and we have already funded $51 million in August last year. The rest of the funds will be ready by 2009, before the completion of the first phase.

With a debt component of 60 per cent, isn’t the FDI component reduced to about $4 billion (the equity portion)?

The total investment of $12 billion should be treated as FDI, consisting of both debt and equity. Debt is FDI too, because we have the responsibility to repay the debt ultimately.

Orissa is seeing a spate of investments in the steel sector, including Mittal Steel’s project. Do you think it has the resources to sustain so many projects?

Sorry, but I don’t think I am in any position to answer this question. It’s best answered by a government official. But I think our project has the commitment from the government through an MoU. So there will be no problems of iron ore, or infrastructure, or water. We have already got approval for water utilisation of 99,000 tonnes per day from the Mahanadi for the first phase.

Have you fixed a product mix for your India plant yet? Or are you keeping it flexible depending on the market situation in the next two years?

Yes, we have for the first phase — 2.5 MT of hot-rolled coils (HRC) and 1.5 MT of slabs. Half of it will be supplied to the domestic market and the rest exported to Korea, south-east Asia and China. In the second phase, we will produce HRC along with plates for shipbuilding and construction, while in the third phase we will produce HRC. In the final stage, we might still export only half of the 12 MT produce.

This product mix will be flexible. If the Indian market needs more HRC, we will meet this. If it needs more value- added products like cold-rolled coil or coated sheets, then we will invest downstream. But not in the first phase.

So you will mainly be concentrating on long products?

Yes, we will. We feel the Indian market needs more supply of flats. India needs long products for construction. It has the capacity for long products.

Have you taken any decision on how you will use the controversial iron ore ‘swap’ clause in the MOU?

We will have to reduce the amount swapped. Otherwise we will incur huge logistics costs. It was decided in a board meeting in Posco Korea last year that we would introduce the Finex process. This way we can consume more high-alumina local ore and reduce the swapping and logistics cost. We don’t know by how much, because we have not explored the mine area yet. But it will be very little.

This is your first integrated carbon steel project outside Korea. What are the lessons you have learnt?

(Laughs) The basic process (clearances, etc.) is the same all over the world, whether it is China, Vietnam or Brazil. But in India, these processes are somewhat lengthy.
Some countries have fast-track clearance for FDI, but here we have to clear all the processes like local investors. But I think the slow pace is because of the consensus required among related organisations and people.

Do you have any intentions of taking part in private-public infrastructure projects in Orissa?

Yes, in developing rail connections. For the first phase, we will use the Haridaspur-Banspani line and the Cuttack-Paradeep line (these are rail routes used for transporting iron ore from mining areas in Keonjhar and Sundergarh to Paradeep port). But these lines will become congested during our second and third phases. So, while we are asking for a doubling of the line between Haridaspur and Banspani, we will also need a line between Haridaspur and Paradeep. We are taking a 10 per cent equity stake in the Rail Vikas Nigam-promoted special purpose vehicle. We will also guarantee 6.5 MT of ore cargo for the first phase.

There have been protests against the Posco project...

We are trying to open channels of communication and provide some gainful employment. We hope people will cooperate when they get accurate information about the project. We are also focusing on community-related activities. We have built two high-mast lights for the villages. We also know that both the Orissa and the Central government are supporting us here.

What do you think of the rehabilitation policy announced by the Orissa government?

It is a reasonable policy, especially for the displaced people. Business might have to pay more, but the displaced persons should be treated fairly and have better means of livelihood.

Great News but I think there were some problems as the POSCO wanted some concesions {Like building a Captive Port,etc.}.Good luck anyway.Economic situation in Orissa is .L N Mittal is also setting up a steel plant there,so we won't miss much if POSCO plant doesn't come up.