South Korean investments in India surged after signing of this agreement and touched $ 3.8 billion by December 2014. South Korean companies forayed into India much before the Make in India programme was officially launched by PM Modi. South Korean companies sources large parts of local contentment, thereby facilitating indigenisation. From its manufacturing base in Chennai, Hyundai Motor India has exported about 2.2 million cars to 123 countries in five continents. Its success story is that with a total investment of $2.7 billion, its yearly turnover is about $5 billion and it has created about 1,50,000 direct and indirect employment including dealers and vendors. India urged Hyundai to set up another manufacturing base in the country. Apart from Hyundai Motors, LG, Hyosung, KC Cottrell, R-Land, Shop CJ, Mirae Asset, Samsung are among over 649 others are present in India covering various sectors like automobiles, power and industrial systems, refrigerating and air control equipment, apparel, home shopping, asset management. Some of these companies are household names in India.

South Korea is no doubt one of the largest investor in India. POSCO’s proposed investment in the steel plant in Odisha’s Jagatsinghpur district is slated to be the highest so far at $12 billion. The termination of this project is likely to send wrong signals to foreign investors, particularly those from South Korea when India is seeking investments in defence products, IT, infrastructure, energy, audio-visual industry, LNG tankers, ship building, smart cities.

What is the problem in getting mining lease? It is the Mines and Minerals Development and Regulation (Amendment) Act recently passed by Parliament that mandate only auction route for getting mines on lease. Modi government has insisted that bidding process should be transparent to avoid and irregularities. POSCO has been old to join the bidding process.

But PM Modi needs to find a way out to give mining release to POSCO on out-of-turn basis. In his recent visit to South Korea he has said: “We will establish a channel – Korea Plus – to facilitate their investment and operations in India.” Will this Korea Plus channel help POSCO in getting mining lease? Will the government make such special channels to facilitate investments from other countries with which it has entered into similar bilateral investment promotion and protection agreements?

The Odisha chief minister Naveen Patnaik has done his bit in providing land to POSCO despite strong opposition from the activists. POSCO India had entered into agreement with the Odisha government in June 2005 for setting up of a 12 million tonne per annum (mtpa) steel plant in Jagatsinghpur district at an investment of $12 billion on 4,000 acre land. Subsequently, the company scaled down the plant capacity to 8 mtpa and said that it needed 2,700-acre land. The state government has already provided 1,700 acre land to the company.

For the first time in 2006, the state government had recommended in favour of POSCO to get prospecting licence over Khandadhar reserves in Sundargarh district. However the then UPA government at the Centre led by Dr Manmohan Singh rejected to consider the case separately and asked the company to participate in open bidding.

Later when the BJP-led government of Narendra Modi assumed office at Centre, the state government renewed its request for POSCO three days before promulgation of the Mines and Minerals Development and Regulation Ordinance. Now PM Modi’s ministers and have begun trading charges. The Union minister of state for petroleum and natural gas Dharmendra Pradhan has alleged that the state government recommended POSCO’s case only three days before the promulgation of the Ordinance that mandates auction of mines. The Union minister of state for commerce and industry, Nirmala Sitharaman said: “The state government had neither sent any such Letter of Intent nor renewed the Memorandum of Understanding before the promulgation of the Ordinance.”

However to resolve the uncertainty over POSCO getting mining lease, the Odisha steel and mines minister, Prafulla Mallick suggested that the state government PSU, Odisha Mining Corporation will supply iron ore to meet POSCO’s demand so that it can produce 12 mtpa crude steel and 11.28 mtpa finished steel.

But the tussle between the state and the Union government and the growing uncertainty over its mining lease have led POSCO to withdraw from Hardaspur-Paradip rail project crucial for the company to source raw materials for its plant and also link to the Paradip port for exports. Refusing to pay Rs 54 core demanded by the state government’s IDCO for land acquisition, it has asked for the refund of about Rs 27.5 crore that was paid earlier.

Even as the POSCO’s Odisha project has become a bitter pill, the South Korean major is in talks with Indian public sector, SAIL for setting up of an integrated steel plant of 3mtpa capacity in Jharkhand. It may be recalled that earlier talks between POSCO and SAIL for a steel plant at Bokaro failed on ownership issue. POSCO was demanding a majority stake to which SAIL did not agree.

Prime Minister Modi had assured President Park Geun-hye during his recent visit to South Korea to resolve the POSCO issue. He also assured her earlier when they met for East Asia Summit in Myanmar. PM Modi intends to resolve the issue through a separate “Korea Plus Channel”. It is to be seen how he resolves this issue. POSCO’s withdrawing from the $12 billion project will definitely have an adverse impact on his Make-in-India and Ease of Doing Business campaign. (IPA Service)