11/08/2015 2:54 PM IST | Updated 15/07/2016 8:25 AM IST

Korean Steelmaker POSCO Signs Deal With Uttam Steel For New Plant In Maharashtra

Bloomberg via Getty Images
Signage for the Posco India Transit Camp, where families relocated from the site of a proposed Posco steel plant have been provided temporary shelter, stands in Badagabapur, Odisha, India, on Sunday, Jan. 19, 2014. Posco may soon start construction on a $12 billion steel complex in India first proposed in 2005 as Prime Minister Manmohan Singh speeds up the approval process for the nations biggest foreign investment. Photographer: Prashanth Vishwanathan/Bloomberg via Getty Images

Korean steelmaker POSCO has not given up on India.

Stuck in a decade-long regulatory quagmire in Odisha for a mega $12 billion steel plant, the company has now turned its sights to Maharashtra. It has signed a deal with Uttam Steel and Power Ltd for a plant that would produce 3 million tonnes of steel every year, one-fourth of the proposed capacity of the Odisha project.

POSCO is caught in a spat with Industrial Infrastructure Development Corporation of Odisha (IDCO), the land acquisition arm of the state government. IDCO had asked the company to pay Rs 54 crore for 1,703 acres of land that was handed over, and another Rs 19 crore to pay for de-reserved forest land. POSCO took exception, and countered IDCO's claim by demanding a refund of Rs 11.21 crore it had paid IDCO for acquiring 438 acres of land in Dhinkia village, where villagers and NGOs put up stiff opposition and refused to give up land.

Posco later scaled back the proposed capacity to 8 million per annum of steel, from the initial 12 million, but still failed to acquire enough land. The company might cancel the project altogether after a new law made it costlier to source iron ore for the beleaguered plant. POSCO currently has steel processing centres in the cities of Pune, Chennai and near New Delhi.

The Korean giant, the world's sixth largest steelmaker, will be hoping that the Maharashtra project does not run into troubled waters. Tying up with a local company might smoothen regulatory issues. Shree Uttam Steel and Power is owned by the co-promoters of Uttam Galva Steels Ltd., which is jointly owned by ArcelorMittal, the world's largest steelmaker, which has been facing land acquisition issues for its own projects in India.

The proposed joint venture with Uttam Steel plans to set up the plant in two phases at Satarda in Sindhudurg district. The plant is expected to benefit from an expected surge in steel demand as the economy continues to grow. Typically, a 1-million-tonne-per-year steel plant requires $1 billion in investment.

Shares in Uttam Galva, which processes hot-rolled steel to finished coils for domestic and export markets, surged as much as 16 percent in morning trade on news of the joint venture.

(With agency inputs)

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