Korean Steel Maker Shelves Plan for $5.3 Billion Mill in India

SEOUL, South Korea - The South Korean steel maker Posco said Tuesday that it had decided to scrap a $5.3 billion plan to build a steel mill in the Indian state of Karnataka because of opposition from residents and other problems.

Posco, one of the world's top steel makers, signed a memorandum of understanding with the Karnataka government in 2010 to build a mill capable of producing 6 million tons of steel a year in Gadag, an iron ore-rich district in the southern Indian state.

The proposal was part of Posco's ambitious plan to tap into India's iron ore reserves and its steel market. But the future of the project has been in doubt since its conception, as protests by local residents against the project have made it difficult for Posco to acquire mining licenses and land.

In 2011, the state government stopped buying land for the Posco project because local communities intensified protests over compensation for landowners and government plans to relocate and rehouse them.

“As the suspension in procuring land for the project got prolonged, we have decided to terminate the project under an agreement with the Karnataka government,” the South Korean company said in a notice put up at the South Korean stock market.

Posco has a separate $12 billion steel mill project in the eastern Indian state of Orissa, billed as India's largest foreign direct investment. It signed the preliminary deal with the state government in 2005. Since then, it has acquired land and has made progress recently in securing a mining license, but has yet to get environmental clearances.

Delays to that project have continued to pile up, as farmers opposed to giving up their fertile agricultural land and forests have clashed with the police in often-bloody protests.

Last year, an Indian tribunal suspended the environmental license given to Posco for its Orissa project, ordering a fresh review by the Ministry of Environment and Forests.

In a report, entitled “The Price of Steel: Human Rights and Forced Evictions in the POSCO-India project,” the International Human Rights Clinic of the New York University School of Law said last month that the Indian authorities have actively used “violence and arbitrary arrests and detentions” against those who speak out against the project.