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POSCO to construct mega steel plant in Orissa
First phase of the Orissa steel plant to entail production of 3 million tonnes
of steel
BY OUR CORRESPONDENT
23 June, 2005: Global steel giant POSCO yesterday signed a Memorandum of Understanding (MoU) with the Government of Orissa in Bhubaneswar for the construction of a steel plant as well as development of iron ore mines in the state. This is the first step towards the construction of a steel plant in Orissa.
The MoU was signed by Mr. Soung-Sik Cho, Executive Vice President of POSCO and Mr. Bhaskar Chatterjee, Principal Secretary of the Government of Orissa, with the participation of Mr. Ku-Taek Lee, Chairman and CEO of POSCO and Mr. Naveen Patnaik, Chief Minister of Orissa.
According to the MoU, POSCO will build a 3 million tonne capacity steel plant, blast furnace or Finex route, during the first phase in Paradeep, Orissa between 2007 and 2010 and expand the final production volume to 12 million tonnes. The investment proposed is to the tune of US$12 billion, including an initial investment of US$ 3 billion during the first phase.
The Government of Orissa will grant POSCO mining lease rights for 30 years that will ensure an adequate supply of 600 million tonnes of iron ore to POSCO. This in turn will ensure the competitive operations of the POSCO India steel plant. The government will also promote the construction plan for railways, roads, industrial water and electricity keeping up with the steelwork construction plan of POSCO.
POSCO, as the MoU with the Orissa state government states, will establish a local corporation in August 2005 and after conducting a detailed investigation and economic feasibility analysis, expects to do land purchase, rehabilitation and resettlement programme, and sign a final Memorandum of Agreement (MoA) later this year.
The key factors that have been taken into account by POSCO for entering India include the highest projected growth rates over 2006-2020, the skilled workforce and abundant natural resources, especially of iron ore, coal and chrome. The Indian governments progressive policies have also helped ease regulations to set up such projects.
India will derive significant benefits from the project once it is functional, including job creation of 48,000 jobs in the region and 467,000 man years of employment during the construction phase. Foreign exchange inflows of US$23 billion are projected, with taxes and royalty incomes of US$20.3 billion for the central government and US$5.1 billion for the Orissa government.
POSCO's Indian steel plant project is a significant part of the company's strategy to enhance its global competitiveness and is seen as a mutual win-win initiative for both the parties involved.
Mr. Padmanav Behera, Minister for Steel & Mines, Government of Orissa, said, “POSCO, which is rated as one of the most respected steel companies in the world, is today partnering with the Orissa government in a historic agreement. This will go a very long way in helping Orissa enhance its global competitiveness and will also facilitate the flow of investment into the state. We view it as being mutually beneficial for both parties. It will help spur industrial progress in the state of Orissa and India through the setting up of the steel plant, and will also help POSCO secure an economically advantageous steel production base in a country with requisite resources and promising demand levels for steel.”
Mr. Ku-Taek Lee, Chairman and CEO, POSCO, said, “Through the POSCO project, we hope to contribute significantly to India's rapid economic development and further accelerate the progress being made by India towards achieving the status of an economic superpower. I am also confident POSCO's Indian investment will shed positive light on India for other global investors, attracting more mega projects to the nation. The success of our project in Orissa will demonstrate to the world that there is a multi billion dollar opportunity to build Indian infrastructure.”
Founded in 1968 and headquartered in the southeastern port city of Pohang, POSCO operates two of the world's premier steel works--the Pohang and Gwangyang works. The Pohang works produces crude steel of 13 million tonnes and specializes in small-lot production of a broad range of products, including hot-rolled coil and cold-rolled sheet, plate, wire rod, electrical steel, and stainless steel. The Gwangyang works focuses on mass-production of limited high-demand products such as hot and cold rolled sheet and produces crude steel of 17 million tonnes. POSCO's products are shipped to over 60 countries around the globe, satisfying some of the world's most quality-sensitive customers.
POSCO employs 19,377 people and approximately 70% of its share is owned by foreign investors. POSCO produced 30.2 million tonnes of crude steel and generated sales of 19,792 billion KRW (US $189.6 billion dollars) and net earnings of 3,826 billion KRW (US $36.7 billion dollars) in 2004.
BY OUR CORRESPONDENT
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