CHENNAI: POSCO, the South Korean steel major, is interested in a win-win opportunity in India and is not seeking concessions denied to other players in terms of public policy at the Central and State levels, according to authoritative sources in POSCO.

Emphasising that POSCO's interest lay in steel making and not in iron ore "trading," the sources said that out of the total investment of $12 billion proposed by the company in Orissa, about $10 billion was for construction of the 12-million-tonne steel plant in Paradip, while investment in mining would be $1 billion. The balance would be invested in port and rail facilities and township.

The sources said that POSCO's request to the Orissa Government to permit the export of 400 million tonnes of ore (apart from 600 million tonnes for captive use in the Orissa plant) was something for the "future" and it would not insist on anything that was opposed by the people of India and went against it's official policy.

"The only place that offers both a mineral source and a sea port that are needed for a mega plant like that of POSCO is Orissa," the sources said. Freight costs were quite high for raw material (iron ore and coal) and finished products in the steel industry and a big producer such as the South Korean company could not afford to set up a plant in the hinterland, unlike many Indian steel producers.

The sources said that concerns over the possibility of the exhaustion of India's iron ore reserves were understandable but "exaggerated." Estimates of a nation's ore reserves were often revised upwards following discoveries or reassessments. Also, improved methods of steel production and greater use of ore fines (as distinct from lumps) would reduce the pressure on the availability of ore.

POSCO, which operates two large steel plants in South Korea with a combined capacity of 30 million tonnes, had been meeting the bulk of its ore requirements from Australia and Brazil, though it bought smaller quantities from other sources, including MMTC and Salgaocars in India. In view of the rising price of ores, it wanted to reduce it's dependence on a few large suppliers and diversify the source base.

Referring to reports of concessions being accorded by the Orissa Government to POSCO, the sources said that the Government's declared policy allowed for mining lease of either 25 years or 30 years. The 30-year-lease offered to POSCO was apparently based on parameters such as the size of investment and production capacity and it was not a company-specific concession. Any Indian company or foreign company could seek the Special Economic Zone (SEZ) status and the SEZ status of the proposed POSCO complex was not outside India's present policy framework.

The sources said that the project cost of Rs. 45,000 crores ($10 billion) in the proposed 12-million-tonne steel plant (leaving aside investments in mining and port) was not high and not exaggerated. The total investment of Rs. 54,000 crores was well within POSCO's capability, considering that the company had shown profits consistently for 32 years since it's inception and had built up reserves to the tune of $5 billion (about Rs. 22,000 crores).

The proposal for "swap" of Indian iron ore having a high alumina content with imported low-alumina ore should be seen in the context of the technological imperatives of furnaces of a large size operated by the company. The question of deploying POSCO's proprietary technology Finex, involving the use of ore fines and non-coking coal, in Orissa, would be decided after evaluation of the ongoing operation of a pilot plant of one million tonnes capacity in South Korea.

The sources said that POSCO's proposed investment would lead to direct and indirect employment for 48,000 people after the completion of all phases. The per-employee productivity of the company in South Korea, at 1,500 tonnes, was ten times as high as that in an Indian producer's case. But POSCO's plant in Orissa would have a much lower level of automation than in South Korea in view of the lower cost of labour in India.

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