ROADBLOCKS FOR POSCO IN

INDIA

TABLE OF CONTENT

1. INTRODUCTION
2. ABOUT POSCO
3. POSCO ENTRY IN INDIA
4. WHAT FARMERS VIEW
5. WHAT GOVERNMENT SAYS
6. WHAT POSCO WANTS
7. CONCLUSION
INTRODUCTION
This project is about entry of POSCO in India and the road blocks that are being faced by
posco in the six years of saga of POSCO in India. This project tells about problems that
are becoming barrier in the setting up of POSCO steel plant in jagdishpur district in
odissa. The POSCO project was the dream project of odissa government that has been
stuck due to road blocks. In this project I have written the different opinions of the trivial
farmers ,government and the company. and keeping in mind all of the points I have given
my conclusion on a possible solution to the problem of protest of POSCO plant in odissa
(INDIA).
The Pohang Iron and Steel Company, or POSCO (KRX: 005490) (NYSE: P) KX
(TYO: 5412) (LSE: PIDD), based in Pohsng, South Korea, is the world's second-
largest steel maker by market value and Asia’s most profitable steelmaker.

Currently, POSCO operates two steel mills in the country, one in Pohang and the other
in Gwangyang. In addition, POSCO operates a joint venture with U.S. Steel, USS-
POSCO, which is located in Pittsburg, California.

With the strong Korean shipbuilding and automobile industry dependent on POSCO for
steel, it has been seen as the bedrock of Korea's industrial development over the past 40
years. POSCO's slogan is "Resources are limited; Creativity is unlimited"

History
1968–1971

In the 1960s, South Korean President Park Chung-hee's administration concluded that
self-sufficiency in steel and the construction of an integrated steelworks were essential to
economic development. Since South Korea had not possessed a modern steel plant prior
to 1968, many foreign and domestic businesses were skeptical of Seoul's decision to
invest so heavily in developing its own industry. Despite the skepticism, under founder
Park Tae-Joon's lead, POSCO was established as a joint venture between the Korean
Government and (then Korea Tungsten Company). It began production in 1972, just
four years after the company's inauguration in April 1968 with thirty-nine employees.

Japan provided the money for the construction of the initial plant, following an
agreement made at the Third South Korea-Japan Ministerial Meeting in 1969. Financing
included US$73.7 million in government grants and loans, US$50 million in credit
from the Japan Export-Import Bank, and technical assistance from Nippon Steel and
other corporations. This cooperation was one consequence of the normalization of
relations with Japan in 1965 and reflected the view of the government of Japan as noted
in the Nixon-Sato communique of November 21, 1969, that "the national security of
the Republic of Korea is essential to the security of Japan."
 [edit] 1972–1992

POSCO first began to sell plate products in 1972 and

focused its sales policies on the domestic market to
improve steel self-sufficiency at home. It made
special efforts to supply quality iron and steel to
related domestic companies at below export price to
strengthen their international competitiveness.

POSCO produced 6.2 million tons of raw steel in

1980, recording a 13% increase over the previous
year, and was one of the few exceptions when almost all areas of the Korean economy
were in economic depression. Domestic industries absorbed POSCO's major products
such as automobile and home appliance manufacturers consuming hot rolled products,
shipbuilding and construction and engineering companies consuming medium plates,
and electric motor and transformer manufacturers consuming electrical sheets. Some
over-produced products were exported to foreign countries but the significant import of
sections for construction left Korea as a net importer. Globally, POSCO was already the
most efficient steel producer in certain products.

By the late 1980s POSCO's growth had been immense. It was the fifth biggest steel
company in the world, with an annual production approaching 12 million tons worth 3
trillion won. POSCO's continued to expand productivity and size at a time when the steel
industries of the United States and Japan were declining. POSCO completed its
second-phase mill at Gwangyang in August 1988. A third-phase mill completed in 1992
further increased crude steel production to a total output of approximately 17.2 million
tons a year. In terms of productivity, POSCO was the world's best steel manufacturer
throughout the late 1980s and also was at the top in terms of facilities.

Pohang, previously a fishing port whose major industry was processing fish and marine
products, became a major industrial center with almost 520,000 people. In addition to the
huge integrated steel mill, Pohang became an industrial complex housing companies
that manufacture finished steel products of raw materials provided.

1992–1997

Changes in managerial systems and organizational structure accelerated in 1993 when

POSCO's president and founder, Park Tae-Joon, who had wielded absolute managerial
authority for more than 25 years, resigned.

These changes were not without controversy however. Park Tae-Joon was ousted under
the Kim Young-sam government for alleged slush fund building and money
laundering, which was later proven to be false, and went into "voluntary exile" in Japan.
Most of the top management under him at the time were also fired. After the inauguration
of the Kim Dae-Jung government and Park's rehabilitation and climb to power, most of
these former managers were returned to their previous posts at the state owned steel
maker. Then POSCO chairman Ryu Sang-bu and president Lee Ku-taek, and POSCO
Development chairman Park Doo-pyo and managing director Cho Yong-kyong, all
received support from Park who later went on to become the Prime Minister of Korea.

With the change in leadership—from Park Tae-Joon to Ryu-Sang Bu, POSCO increased
decentralization and diversification. POSCO's management emphasized greater
flexibility, autonomy, and consensual decision-making processes. The chairman also
moved to devolve more autonomy to the profit centres and changing from a strictly
hierarchical organizational structure to one based on teams.

In July 1994, POSCO created two subsidiary companies, POSTEEL and POSTRADE.
POSTEEL is the domestic sales and service arm of the company, while POSTRADE
handles international trading of POSCO products. Both subsidiaries commenced full
operation in September 1994, with all international POSCO affiliates transferred to
POSTRADE by the end of that year. The landmark Posteel Tower on Tehran Street, in
Seoul's Gangnam district (not to be confused with the POSCO Center, also on Tehran
Street) was completed in 2003.

1997–2000

In 1997, Seoul announced that it was going to transform POSCO into a private
company in line with the government's new policy of privatizing government-owned
corporations. The government planned to retain a majority share of the stock; initial
reports in the South Korean press in 1998 indicated that the sale of public shares was
going slower than anticipated. However, the administration led by Kim Young Sam
changed the initial policy direction of privatization of POSCO and decided not to sell
government-owned stock to keep it as a government investment enterprise.

But, the Kim Dae Jung administration following the Kim Young Sam administration
listed privatization of public enterprise as a high priority policy in economic policy
agenda to implement mainly because of outbreak of the economic crisis. The new
administration decided to privatize POSCO and by 1998, the South Korean government
had reduced its ownership of shares in POSCO to less than 20%, and more than 50% of
the shares in POSCO were in the hands of foreign investors. In 2000, full privatization
of POSCO was completed.

2001–present

As part of the privatization process, new Chairman Lee Ku-Taek began efforts to
introduce a professional management and governance system of global standards for
POSCO. Under the new governance system, management made accountability to
shareholders a priority. POSCO also introduced a new performance-based evaluation and
compensation system. Throughout most of its privatization drive, POSCO increased its
revenue and business profit. Thanks to robust demand at home and in China, POSCO
recorded the largest profits in the global steel industry in 2004. Net earnings from
POSCO's array of steel products - used in everything from screws to skyscrapers - shot
up 80% to $1.66 billion in 2004 from the previous year.

With increasing global competition, POSCO looked to China and India for new
opportunities. South Korean wages were too high to support a whole range of activities
and POSCO looked elsewhere for new projects while keeping the areas where they have
a comparative advantage in South Korea. By 2006, POSCO had 26 subsidiaries and
invested over $2.4 billion in fresh investment on mainland China, especially in
galvanized and stainless steel to supply global auto and appliance makers that have
opened plants there. In 2006, POSCO started operating the Zhangjiagang Pohang
Stainless Steel(ZPSS) steel mill capable of producing 600,000 tons of stainless steel
and hot-rolled products annually in China’s Jiangsu Province. As a result, POSCO
became the first foreign firm operating an integrated stainless steel mill in China,
handling the entire production process from smelting iron ore to finished products,
including the cold rolled stainless plant it already operates.

In June 2005, POSCO signed a memorandum of understanding with the State of

Orissa in India. Under the agreement, POSCO plans to invest US$12 billion to construct
a plant with four blast furnaces, an electricity plant, housing, and an annual production
capacity of 12 million tons of steel, which is slated to start production in 2010. The
project, which would start with a 3 million tonne capacity initially, would fetch revenue
for the government to the tune of Rs 700 crore to Rs 800 crore (Rs 7-8 billion) annually.
It would also provide direct employment to 13,000 people and ensure indirect
employment for another 35,000. The Orissa State government also promised to provide a
total of 600 million tons of iron sources, and will allow POSCO to use iron ore from
these sources over the next 30 years. If the project goes ahead, it will be the single largest
foreign direct investment in India as well as being the world's biggest greenfield steel
plant ever.

However, from 2005 till date (as of August 7, 2010), the India project has not been able
to proceed due to strong opposition from the local residents in the area proposed to be
given for the steel plant. There have been allegations that the federal and State
governments have been illegally trying to take lands and forests for the project, in
violation of the Forest Rights Act.[4] There have also been claims that the project will
only benefit the company while displacing more people than it employs, damaging the
environment and taking India's mineral resources at a very low price.[5]

POSCO have pursued investment opportunities in other developing countries such as

Vietnam and Mexico. It was announced in August 2006 that POSCO will build a large-
scale steel mill in southern Vietnam. POSCO plans to build the US$1 billion plant in
two phases for hot-rolled and cold-rolled products by 2012. When completed, the mill is
expected to produce three-million tons of steel products annually. Posco also plans to
build a $250 million plant in the city of Altamira, Mexico, to produce 400,000 tons of
galvanized steel sheet a year for automakers . The venture will be Posco's first wholly
owned steel-plate plant in North America. Posco plans to begin construction in early
2008, and start operations in 2009, producing galvanized and galvannealed steel.

On June 30, 2006, POSCO completed the construction of its sixth continuous galvanizing
line (CGL) at its Gwangyang mill in the South Jolla Province. With this new addition,
POSCO becomes the no. 2 producer of sheet-steel just behind ArcelorMittal

In early 2007, Warren Buffett's Berkshire Hathaway purchased a 4% stake in POSCO.

Management organization

Head Office

POSCO's Headquarters, along with the POSCO Center, form the 'brain' of the company,
overseeing major tasks, such as the management, planning, and finances of the
steelworks at Pohang and Gwangyang. The construction of POSCO headquarters at 1
Goedong-dong, Nam-gu, Pohang, was completed on April 1, 1987, and has since
become a structure that symbolizes the entire company.

POSCO Center

Winner of the 1995 Seoul Architectural Award for its progressive combination of modern
design and eco-friendly engineering, POSCO Center is regarded as Korea's first state-of-
the-art intelligent building. This landmark in the heart of southern Seoul's Teheran
Valley high-tech venture corridor also hosts a wide variety of free cultural programs,
events, and exhibitions throughout the year.
POSCO-India Private Limited is a subsidiary of POSCO, the world’s fourth
largest steel producer and one of the most competitive steel companies. POSCO
signed a Memorandum of Understanding (MoU) with the Government of Orissa in
June 2005, to set up a 12 MTPA green field steel plant near Paradip, Jagatsinghpur
District, Orissa, with an estimated investment of USD 12 billion. The company will
build a 4 million-tons per annum capacity steel plant in Orissa, durinCorporate
Overviewg the first phase of its project , and expand the final production volume to
12 million tons per annum. POSCO-India Pvt. Ltd. was incorporated on 25th August
2005. The fate of the Rs 51,000-crore (Rs 510-billion) project hangs in balance after
a four-member Forest Advisory Council filed a split report on withholding
environment clearance, people in this coastal village, the hotbed of the resistance
movement, are worried about getting displaced. [1]

POSCO, the parent company operates two of the world’s premier steelworks at
Pohang and Gwangyang, having a combined production capacity of 31 million tons
per annum (MTPA). The Pohang steelworks produces 13.5 million tons of crude
steel and specializes in the production of small lots in a broad range of products,
including hot-rolled coil and cold-rolled sheets, plates, wire rods, electrical steel and
stainless steel. The Gwangyang works focuses on mass production of limited high-
demand products such as hot and cold rolled sheets, and produces 17.5 million tons
of crude steel. POSCO’s products are shipped to over 60 countries around the
globe, satisfying some of the world’s most quality-sensitive customers.

•
Permisssion

Finally, the country’s biggest foreign direct investment has got the green signal. The
environment ministry on 31 January, gave its clearance to the Rs 50,000-crore
Posco integrated steel plant in Orissa on 31 January, relenting on its tough
insistence on absolute compliance with environment laws.

Environment minister Jairam Ramesh put 60 new conditions on the project, though
— 28 for the steel plant and 32 for the captive port — but these are unlikely to be
high obstacles for the Korean promoters
Six-year saga
June 2005 | South Korea’s Pohang Steel Co signs memorandum with Orissa govt to
set up Rs 51,000cr steel project, the biggest FDI in India. By end-2011 Posco hopes
to produce 12 million tonne of steel a year

Aug 2008 | SC upholds “in-principle” clearance for use of forest land but directs
environment ministry to probe alleged violations

Jan 2010 | Ministry says clearance for diversion of forest land subject to
implementation of Forest Rights Act

Aug 2010 | MoEF halts project, probes alleged violation of forest rights

Oct-Nov 2010 | Two inquiry panels of ministry recommend temporary withdrawal of

clearance; allege gross illegalities, accuse Posco and state govt of concealing
information. 2 of 3 internal inquiries echo findings

Jan 31, 2011 | Ministry clears steel & power plants and captive port
CONCLUSION

In this case what I think can be a possible conclusion is

1. the government should double the compensation for the villagers

2. 2. the government should take proper care of the rehabilitation of the effected
farmers.

3. the project cannot be delayed because it is in favoyur of national growth and

India can become self-suffecient in steel production and also a leading steel
Exporter.

4. the government should make farmers understand that this project is i9n
nation interest it is in the interest of the whole country.

5. envioremental norms should be followed in setting up of the POSCO projrct.

6. The government should come out with a win-win formula for all parties for the
effected farmers and the nation and POSCO.
BIBLOGRAPHY

1. The information has been taken from articles in ECONOMIC TIMES.

2. Some content is taken from wikipedia.org.

3. The view of the farmers have been taken from an interview of farmers with
THE TELEGRAPH news paper.

4. The view of government has been searched from ORISSA NEWS website.

5. The POSCO official view has been searched from ET.

6. The conclusion has been give been analyzing all views.

WHY FARMERS OPPOSING POSCO PLANT

Farmers are opposing the POSCO steel Greenfield plant in district jagdishpur of odissa
which government of odissa proposed by signing an agreement with POSCO steel which
is the second largest steel producer in the world. The 12 million tones project is proposed
on the agriculture land of the tribal farmers and the farmers don’t want to give there lands
and there occupation of betel leafs which has been there economy from centuries. The
farmers say they don’t want to give there lands and go away and settle because they like
there work of betel leaf and collecting of forest products and they don’t want any change
in there lifestyle at any cost. The government is giving them compensation for there land
and planning for there rehabilitation some where else but they don’t want to go and they
don’t want any money for forcable removal of them from there own land . They farmers
say that the land belongs to them and they are not in a view of giving it for a steel plant in
there area.

The farmers say that they don’t want the plant to come on there cost and there life.

They farmers say that they are happy with whatever they earn from there economic
activities.

The government is offering them 17 lakh rupees per acree for peddy fields and 11.5 lakh
per acre for other land. The government to lure them are also promising a job , a pucca
house and transport allowance to get the land from farmers for the much delayed 12
million tones steel plant.

The farmers rejected this offer and termed the package as an act of betrayal
The farmers say that chief minister should come here and see the green betel vine fields,
the orchards and then think is it right to destro all this for a steel plant.

One farmer in an interview to telegraph told that he earns Rs 1 lakh per annum from his
betel vine farming and this provide employment to 20 other families in the village .

He said if this plant comes up on there land it will bring them on streets as they will lose
there livelihood.

Farmer’s also that betel vine farming is like a gold pot for them and rs 11. lakh per acre is
very little compensation they say it should at least be doubled so they can opt for some
other work for there livelihood.

The farmers say that they have been mated out a raw deal as Essar had paid for 19.5 lakh
they are paing only 11.5 lakh betel vine land which is green and very fertile land

The farmers who are supporting the POSCO project also say that this is not a fair deal
and they should be paid more because they are the most effected people from this project
they are lossong their livelihood for the setting up the steel plant on there land.
Odisha Government says that it will renew the Memorandum of Understanding
(MoU) with POSCO for setting the `52,000 crore Steel Mill near Paradeep in
Jagatsinghpur district. It was announced by Steel and Mines Minster Raghu
Nath Mohanty. And this time the process has been started to extend the deal
period for a six years instead of five years.

He indicated that the renewal of the MoU was in advance stage of finalisation
and would be put in place soon. With the Union Ministry of Environment and
Forest on January 31 giving Clearance with conditions for the setting up of the
controversial multicrore POSCO steel mill and the captive port, the biggest FDI in
the country, the Odhisa Government had initiated steps to regularise the deal to
help start the work. The conditions put-forth by the MoEF for the proposed
integrated POSCO Project were also examined thoroughly and soon all the
points would be Complied with soon, said that Minister of Steel and Mines.

He indicated that the compliance is likely to be made within next three days to
the MoEF. Stating that the project would herald a new area of industrialisation
and economic growth in Odisha and the country as well, Industry Minister said
that the state government had already formulated a new recruitment policy for
the ongoing and upcoming industries with the main thurst of more employment of
locals.

He said that the same would be applicable to POSCO. As per the new Policy, 90
per cent of the required semi-skilled and un-skilled worked would be provided
employment in the POSCO.

Similarly, 60 per cent of the skilled jobs would be reserved for the locals and in
Managerial posts 30 per cent of the local people would be provided jobs in the
project, he said.

The MoU signed on 22nd June 2005 between the Government of Odisha and
POSCO for a period of five years had already lost its validity since August 2011.

The government says they are offering good compensation for the farmers land
for acquiring there land for POSCO project.
The government says that if the project comes in existence Odissa will become
the largest producer of steel as POSCO is a big company and has modern
technology and machinery for production of good quality of steel
The government also says that this project if comes in existence then it will make
an economic enviorement in the state of Odissa.
The government say that this project will make odissa one of the most Indutrial
progressive states in the country.
The government says that it will increase the revenues of the government as it
will generate more taxes.
This project will help India generate more revenues as a major part of the
production will be Exported abroad.
The government says that it will create a lot of jobs for both skilled and semi-
skilled employees both directly and indirectly.

WHAT POSCO SAYS

The.company POSCO says that it is not going to bakup from the project and the
government has initiated the move to sign the MOU again for setting up steel mill
in jagdishpur district of Odissa after the steel ministry has given its clearances for
the project.
The company says that India is an emerging Economy in the worl and POSCO is
in no mood of losing an opportunity of doing business in India .
POSCO says that this Greenfield steel mill project is an ambitious project for us
and this will fuel up our growth opportunities in global markets.
POSCO officials say that this 12 million tones steel mill project will give POSCO
an edge over its competitors.