POSCO’s great Indian fiasco

Shubham, Vinay Kumar Kalakbandi and Shashank Mittal

It was a pleasant January morning for Kwon Oh-Joon, the CEO of POSCO, in New Delhi. Shubham is based at
While the local newspapers reported a cold wave in North India, Kwon felt it was quite Department of Operations
pleasant as he was flying in from the sub-zero temperatures of Seoul. Having taken over as and Systems, Indian
CEO barely ten months ago, in March 2014, Kwon knew that India was an important piece Institute of Management
Raipur, Raipur, India.
of puzzle that had to fall in place for POSCO to realize its global expansion plans. His
Vinay Kumar Kalakbandi
predecessor had set 2018, the 50th year of POSCO’s existence[1], as the goal for POSCO
is based at Department
to reach KRW 100 trillion in sales and the person he had come to meet at this swanky
of Operations and Supply
mansion in New Delhi might be the one who would make it possible for him[2]. Chain Management,
He knew that his wait was not going to be long as the person he had come to meet was Institute of Management
known for his work ethic and discipline. As he waited along with the Korean Ambassador Technology, Hyderabad,
Telangana, India.
to India, Joon-Gyu Lee and their language interpreter, he mentally reviewed the previously
Shashank Mittal is based
agreed upon talking points. In a few moments, Narendra Modi, the Prime Minister of India
at Department of OB &
entered the room wearing a brown suit, cream trousers and a white and black muffler. The
HRM, Rajagiri Business
meeting went as planned and the PM was cordial and listened to them patiently. However, School, Cochin, Kerala,
no major breakthrough ensured[3]. India.
On his way back to the airport, Kwon’s mind went back to the PM’s muffler which indicated
that even he was feeling cold. In his mind, Kwon drew parallels between how his
perspective differed from that of Indians, in matters of temperature and development of
integrated steel plants.

The genesis
POSCO (Pohang Iron and Steel Company) is the world’s fourth-largest steelmaker with an
installed capacity of 41.4 MTPA and revenue of US$58.38bn in 2014. POSCO produces
hot-rolled, cold-rolled and stainless steel at Pohang Works, the largest single steel mill in
the world, and Gwangyang Works. As of 2014, the company had 17,877 employees
working at POSCO. POSCO aimed to attaining sustainable growth which it defined as
achieving economic performance based on environmental and social responsibilities.
POSCO strived to meet this goal to ensure responsible management based on trust with the
stakeholders and providing sustainable solutions for customers and society.
POSCO believed India to be an ideal destination for strategic investment owing to its
abundant natural and human resources. POSCO wanted to build a cooperative relationship
by building a competitive steel plant using advanced steel making technologies. Although
India was a traditional steel producing nation, POSCO had proposed to bring the latest
Disclaimer. This case is written
technology for producing high-grade steel for the domestic market would reduce country’s solely for educational
reliance on imports. POSCO’s investment in Odisha was in continuation of their long-term purposes and is not intended
to represent successful or
investments in downstream steel plants in various other states of India. unsuccessful managerial
decision-making. The authors
To this effect on June 22, 2005, the South Korean steel conglomerate signed a may have disguised names;
financial and other
Memorandum of Understanding (MoU) with the State of Odisha in India for the construction recognizable information to
of an 12 million tons per annum (MTPA) integrated steel plant, a 600 million ton captive iron protect confidentiality.

DOI 10.1108/EEMCS-02-2018-0014 VOL. 8 NO. 4 2018, pp. 1-23, © Emerald Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
 ore mine, a captive port, a 1,500 acre township adjacent to the steel plant and a 500 acre
township near mining site. In addition, a captive power plant of 1,300 Mega Watt per annum
was to be built at the plant site. POSCO-India agreed to pay the state of Odisha a royalty
of INR 27 (US$0.407) for every ton of iron ore extracted. In 2005, the market value of a ton
of iron ore was US$62 in the global market. The investment of worth US$12bn by POSCO
was touted to be the biggest foreign direct investment in India and would require over
12,000 acres of land. POSCO promised that the project would contribute US$1.95bn to the
state GDP annually, an annual tax revenue of US$421m, and provide 870,000 jobs over 30
years, due to the cumulative project impact[4].

State support
The project received an active backing from the Odisha’s Chief Minister, Naveen Pattnaik
and the state machinery who believed that large-scale investments such as POSCO could
help enhance the state’s revenues and help alleviate its otherwise lacklustre economy[5]
and was willing to go to any extent to facilitate the project to go through. To this effect, the
state administration agreed to designate the proposed project area as a Special Economic
Zone (SEZ), which was going to support POSCO in the form of significant Tax breaks,
among other benefits. The state government further also agreed to support POSCO in
facilitating “all environmental approvals and forest clearances from the Central Govt. within
a minimum possible time frame” (Mukhopadhyay, 2006).
After signing of the MoU with the state government, POSCO applied for getting the statutory
clearances for the project. An environmental impact assessment (EIA) report was prepared
based on the rapid environmental impact assessment (REIA). The REIA was prepared for
a 4 MT per annum integrated steel plant, the captive port, and 400 MW captive power plant.
Following the REIA, POSCO also conducted a public hearing for the steel plant and the
port, on April 17, 2007. Based on the REIA report and the public hearing proceedings,
POSCO applied for the clearance and permission to the Ministry of Environment and
Forests (MoEF), Government of India for the integrated steel plant and the captive port.
Based on POSCO’s report, the MoEF granted the environmental clearance for the captive
port on May 15, 2007, and to the integrated steel plant on July 19, 2007. As the port was
in the coastal region, POSCO was also required to obtain Coastal Regulation Zone (CRZ)
clearance from the MoEF. The CRZ clearance was granted to POSCO on May 15, 2007.
Further, almost 74 per cent of the land for the integrated plant lied in the forest region with
about 0.28 million trees, which were protected under the Forest Conservation Act, 1980[6].
POSCO obtained an in-principle forest clearance on Sept 19, 2008, and the project was
granted final clearance on December 29, 2009[7].

The response
In spite of obtaining all the necessary clearances, the project had made little progress on
the ground. This was due to a sustained opposition from the local communities who
believed that they would get adversely affected by the project. The proposed plant and port
project affected a total of eight villages across three gram panchayats[8] in Jagatsinghpur
district of Odisha. The project threatened to displace approximately over 22,000 people in
the plant and port area alone, and thousands of others who depended on the ecosystem
for their livelihood face destruction of their livelihoods. Over 60 per cent of the community
cultivated betel leaves on the forest lands by communities living on these lands for
generations[4].
The affected communities resorted to non-violent and democratic protests to oppose their
forced eviction from the land that they and their families had lived upon and cultivated for
generations[9]. The acquisition of land for the project was believed to destroy the local
economy and livelihood of residents of the area. In addition to the families who stood to get
displaced from their land and livelihoods, there were thousands other non-residents who

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

actively participated in the local economy as labourers. Even their source of income was
threatened by this project. Further, the proposed port also threatened to restrict the access
to the sea, which was a source of livelihood for the fisherman community who were not
included in the R&R package. In addition, the mining operations of the project in
Khandadhar hills would affect thousands more. These hills were home to several vulnerable
tribal groups sustaining themselves from the forest. These tribes either cultivated rice and
indigenous lentils and grains on the land or practice shifting agriculture. The proposed sites
were predominantly rural and for generations, residents had secured their livelihood in the
unique environment of the area such as forest land, proximity to the sea, providing many
ways for the families to sustain their livelihood in a natural way throughout the year. In
addition to the cultivation of betel leaf, cashews, the local families operated shrimp farms,
engage in finishing and animal husbandry.
The agitating people together with the local Non-Governmental Organizations (NGO)
formed the POSCO Pratirodh Sangram Samiti (Anti-POSCO People’s Movement, “PPSS”).
PPSS engaged in non-violent direct action, and formed a blockade around the three
gram-panchayats, to prevent land acquisition, and had gained significant support from a
broad range of civil societies in Odisha, India, South Korea, the USA and Europe. Men,
women and small children played a prominent role in the PPSS anti-project movement,
staffing roadside checkpoints throughout the night. PPSS President Abhay Sahoo explain
this[10]:
Both men and women work together in betel farming. Similarly, men and women are fighting
alongside one another in PPSS [. . .] [. . .] [we] held a rally and each of us wore a band across
our forehead that said Abhay Sahoo. We shouted, “You put one Abhay Sahoo in jail, we still have
thousands more.

He further noted echoing the views expressed by many villagers:

We don’t want POSCO. We just want the green land, with natural beauties. We don’t need
outside companies. We want the outside companies to go and leave us alone.

One of the villagers quoted:

Since 300 years we have been living in this place. And we are living very comfortably [. . .] If
POSCO comes, then what type of job will it offer us? We ourselves employ 50-60 laborers in a
month in our betel vineyard. What type of project will POSCO run and in what capacity will it
employ people?

The protests were actively supported by the Communist Party of India which was the key
opposition party in Odisha. Abhay Sahoo was a member of the party. The party had
decided to oppose the POSCO project from the very beginning regardless of the
rehabilitation package[11]. Abhay Sahoo was entrusted to lead the protest against the
project.
There was one group named the United Action Committee which comprised of villagers
from Nuagaon, one the biggest of the affected villages who supported Posco’s entry. This
group was however portrayed by the PPSS to have been turned around using money power
and clashes ensued between pro-Posco and anti-Posco groups, claiming five lives. These
violent clashes caused permanent damage to the livelihoods of some anti-Posco activists,
including women, who got arrested[12]. The lead protestor Abhay Sahoo was also arrested
during this time[13] although he blamed his arrest as a criminal conspiracy.

Government’s perspective
The state of Odisha continues to be one of the poorest and underdeveloped state in India.
Since Independence, Odisha had witnessed a high unemployment rate with a lower level
of access to basic health care and education. The eastern coastal regions of the state were
some of the poorest areas in the country. Almost half of the population in this part lived on

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

 less than US$1 per day. Also, this region had been regularly hit by devastating oceanic
cyclones; due to this starvation and migration for survival were general problems for this
reason.
In the past decade, the government both at the Centre and State made attempts to
increase the pace of economic development. The government had recognized that the
state’s rich mineral resource as the most viable resource to achieve the desired economic
and social development of the state. The attempts to tap into this rich mineral resources
almost always met with widespread agitations. Most recently, the Vedanta Aluminium
project in the state was initially approved by Government of India and Government of
Odisha. However, it was later canceled by the Supreme Court of India after massive
protests from the local tribal community[14]. Odisha had almost 23 per cent of the
population comprising of tribes and 38 per cent of its geographical area under forest.
Therefore, any large-scale infrastructural and industrial project would involve a certain
amount of environmental degradation involuntary displacement of tribal communities and a
direct impact on their livelihood.
Past incidences of mass uprisings against large infrastructural and industrial projects
leading to mass involuntary displacement resulted in Government of India and various state
governments enacting Rehabilitation and Resettlement acts. The rehabilitation activities of
the Odisha government were governed by Orissa’s R&R Policy (ORRP) 2006. This policy
fixed the level of compensation for families displaced by acquisition of land and other
peripheral benefits such as training for self-employment, convertible preference shares,
providing land at an alternate location coupled with house building assistance.
POSCO was willing to provide an R&R package which was over and above the
prescriptions of ORRP. In view of this, POSCO’s proposal to invest in the state was
welcomed by the Government of India and the State of Odisha. Apart from the Royalties,
the project was set to create millions of direct and indirect jobs. The government was
expecting economic development, capital formation, technology transfer, local
employment generation, etc. The cumulative annual effect on the state of Odisha would be
gross output of US$4.5bn, value addition of US$1.8bn and employment for 870,000[15].

POSCO’s perspective
Under the MoU signed, the Government of Odisha was to acquire and transfer 4,000 acres
of land for the integrated steel plant, captive port, and 2000 acres of land for POSCO to
develop a township. Of the total 4,000 acres for the steel plant, it was only 437.66 acre of
land that was under private ownership and required displacement of the local community.
POSCO would be responsible for the compensation and exgratia for the private land.
Complying with the provisions of ORRP 2006, POSCO in 2007 agreed to compensate 471
families from the 6 of the 8 displaced villages as per the R&R package. POSCO agreed to
provide resettlement assistance which included homestead land in the resettlement
location or cash equivalent of INR 50,000; house building assistance INR 150,000 and
assistance for temporary shed of INR 10,000, and transportation allowance of INR 2,000 or
free transportation to the resettlement location per displaced people according to the
ORRP 2006. Further, POSCO also agreed to provide maintenance allowance to the
displaced families for a period of one year. Basic habitation amenities such as electricity,
road, drinking water and school shall be provided at the resettlement area by POSCO. One
eligible member from each displaced family would be provided a job and other
unemployed members POSCO would be provided skills training that would aid in providing
income restoration for the displaced families.
In addition to the 471 displaced families, POSCO also made provisions for betel vine
cultivators and fishing communities who were not within the scope of the ORRP 2006.
These communities were classified as encroachers as they were landless but are in

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

possession of the encroached government land for a period of 10 years or more. These
families were provided with a lower compensation under the Land Acquisition act which
provided much lower exgratia and benefits.
In light of the discontent of some local communities, POSCO in consultation with
Government of Odisha again revised the R&R package in 2010 wherein- betel vine
cultivators were provided a one-time compensation of INR 1,150,000 and land fewer
laborers rendered jobless because of the steel plant would receive 20 per cent of such
compensation. Further, an unemployment allowance of INR 2,250 per month to each
laborers up to 1 year in case no employment opportunity is provided to them. Fishing
communities would also be provided with a compensation of INR 200,000 per family.
Families owning fruit bearing and non-fruit bearing trees were also to be compensated.
Further, POSCO also agreed to revise the layout of the project several times to areas which
are scarcely populated to minimize the number of people displaced. POSCO also
established Effective Grievance Redressal Mechanism to resolve the grievances from
different stakeholders.
On the several claims of human rights violation around the project site, POSCO at different
forums reiterated its commitment toward the principles of respecting human rights. Further,
it had officially requested the Government of Odisha to protect the people’s human right
and livelihood and not use any illegal force[16].

Perspective of local community

Within months of the signing of the MoU between POSCO and Government of Odisha, the
POSCO Pratirodh Sangram Samiti (PPSS) consisting of villagers displaced by the project
was formed. The people’s main objection was with regards to the denuding forests and
destroying their natural habitat. The project would destroy forests and the habitat of not only
the local community but also the animals that have a very special place in the community.
Further, it was estimated that the construction of the steel plant will lead to the destruction
of about 200,000 trees and 3,500 betel-vine farms. The upcoming port would also
adversely impact the mangroves that were repositories of the biodiversity and a breeding
ground for several marine life forms such as the Olive Ridley turtles which were protected
under Indian law. The project also threatened to remove sand dunes that acted as a natural
barrier against cyclones that the area was already vulnerable to. Also, the region along the
coastline of the proposed port had been classified as a “Highly Sensitive Zone” as it was
already under critical environmental stress due to pollutants flowing in from the nearby
Paradeep port.
Further, there were serious concerns regarding the compensation to the displaced people.
Although POSCO R&R package was in-line with the compensation policy prescribed by the
Government of Odisha, people viewed it to be unreasonable. The land to which the local
displaced persons will be relocated was criticized as inadequate for the local community
to sustain their livelihood. Some in the community believed that mere land compensation,
however big it may be, will not compensate the loss of their sustainable livelihood. The
community leaders argued that the project would destroy the existing livelihood of the local
people as it is based on agriculture and fishing. The one-time cash settlement meted out
to betel leaf farmers, fishermen and landless laborers were also unacceptable. For most of
them, the only future option was to become wage laborers at POSCO which neither
provided job security given their current skills nor had the potential to provide higher cash
income than they already made. The local communities felt that the R&R package did
provide sufficient opportunity for empowerment and prosperity and viewed the Government
and POSCO-India actions are a threat of exploitation and upheaval of their way life.
Over and above the aforementioned concerns, POSCO was also blamed to have
committed several statutory violations in the process of receiving the environmental

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

 clearances. Firstly, the project was supposed to be an integrated project with steel
manufacturing plant, captive mines, power plant, port, township, etc. But POSCO is alleged
to have delinked and alienated each component of the project dilute and mitigate the
adverse impact on the environment. POSCO-India had obtained clearance in a piecemeal
manner and on the pretext of phase-wise construction of the project. POSCO-India signed
MoU with the Government of Odisha for an integrated steel plant of 12 MTPA, whereas the
EIA and a public hearing were for 4 MTPA and the Environmental Clearance was obtained
for 8 MTPA. The Governments both at center and state granted the necessary clearances
in spite of the aforementioned gross inconsistencies and were perceived by the people to
be hand in glove with a large international corporation.
Several fact-finding committees[17] appointed by the Ministry of Environment and Forest
(MoEF) Government of India has alleged gross misconduct on POSCO’s part in conducting
the EIA. The entire clearance process was perceived by the local groups as farcical and an
empty formality by all concerned. The environmental clearance process was also blamed
to be severely compromised by a complete lack of scientific rigor. For instance, the REIA
was based on one season data against the acceptable practice of whole year’s data[3].
From the stage of preparation of the REIA, the conduct of the public hearing, to the
assessment process by the Expert Appraisal Committee at every stage, local communities
along with NGOs alleged irregularities which rendered all the clearances given both under
the EIA notification and the CRZ notification invalid and illegal. Further, it was alleged that
Government of Odisha had signed MoU with POSCO without obtaining the consent of the
local community and environmental clearance. Even the government auditor the
Comptroller and Auditor General (CAG) of India has reported that Government of Odisha
has ignored even the essential requirements such as environmental clearance and consent
of local resident while acquiring land and allotting it to POSCO-India.

Violent protests and the aftermath

In over five years from the date of signing of the MoU, the sustained protests had gained
significant momentum and popular support. The leaders of PPSS were at that point invited
to meet the CM of Orissa. Abhay Sahoo and his associates got to meet Naveen Pattnaik
where they reiterated their demand not to have POSCO in the said area due to adverse
environmental and social impact and invited Naveen Pattnaik to visit to region to
understand the pulse of the people. While Naveen Pattnaik initially signaled that he would
visit the region, he did not go through with it. This further enraged the protestors[18].
The last straw on the camel’s back was the final clearance for the diversion of the forest
land in early 2010. The local communities alleged that this clearance fully neglected the
claim of the forest dwellers and stepped up their protest blocking the entry point to the
project area. By mid-2010, the protests against POSCO reached a tipping point leading to
heavy police deployment and consequent violent clashes between the protesters and the
police. As per media reports, at least 30 people were injured in these clashes. In January
2011, the protestors supported by several NGOs approached the National Green Tribunal
challenging the environment clearance to POSCO.
April 29, 2011, came as a major relief for POSCO-India, with the MoEF (Ministry of
environment and forest) granting the final approval for the diversion of 1,253 hectares of
land in favor of POSCO-India. But this relief was short lived when on 30th March 2012,
Nation Green Tribunal (NGT) suspended the environmental clearance (EC) given to
POSCO-India by MoEF in 2011[19]. The NGT order called for “a fresh review of the Project”
due to the multiple concerns raised on the original Rapid Environmental Impact
Assessment (REIA) of POSCO-India. The NGT found it unacceptable for the Government of
Odisha and Government of India granting EC to POSCO-India for 12 MTPA project when
the environmental assessment was based on REIA and most seriously based on 4 MTPA

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

phase one project[20]. POSCO-India committed to developing green belt in 33 per cent of
the total area of 2,700 acres of land, and treatment of all the wastewater generated within
the plant itself for recycling. Based on the above arguments MoEF on January 7, 2014,
recommended the revalidation of the environmental clearance (EC) dated 19.7.2007
subjected to environmental safeguards[21].
With regard to land acquisition, Government of Odisha and POSCO-India continued with
the land acquisition and clearing of the forest. In July 2012, POSCO-India resubmitted a
revised proposal go the Government of Odisha seeking the transfer of 2,700 acres of land
for an 800 MTPA integrated steel plant, instead of the previous 4,000 acres for the 12 MTPA
plant. Further, Government of Odisha also decided against acquiring the 438 acres
disputed private land for the proposed plant.
Supreme Court of India’s judgment on May 10th 2013 provided the much-awaited relief to
POSCO-India related to mining rights. The court directed Government of India to take a
decision on the pending project taking into consideration all the objections raised by the
concerned parties[22]. As of 2015, POSCO-India had not received the mining rights in
the region. After the Supreme Court of India’s mandated Government of India to decide on
the issue of mining issue, Government of India sought several clarifications from
Government of Odisha on its recommendation of granting mining rights to POSCO-India,
which Government of Odisha was not able to produce.
The death knell to the project came in the form of a law that the Indian Parliament enacted,
the Mines and Minerals Development and Regulation Amendment Ordinance in January
2015. The new Act made auction a mandatory route for all entities seeking mining
leases[23]. This mode would require POSCO-India to bid for the mining rights which
previously were awarded to it by Government of Odisha on much lower fee. This deeply
endangered the economic viability of the project leading to the eventual demise of the
same.
This development in India took POSCO’s shareholders in a shock. POSCO’s shares fell as
much as 3.3 per cent[24] to its lowest in the past six and half years after the decision of the
Indian Parliament.
This was the context in which the meeting with the Prime Minister was held in January 2015.

The way forward

On his flight back to Seoul, Kwon Oh-Joon was reflecting at the changes the firm has brought
in to engage with stakeholders. Refer Exhibit 1 for POSCS’s new stakeholder engagement
strategy. However, he knew he was staring at the obvious on what to do next for the project. The
project had to be gradually ramped down so that POSCO could cut its losses.
However, a bigger question Kwon wanted to consider was what POSCO had done wrong and what
could POSCO have done differently to ensure success for the project? Was it unwise to fully rely on
the local government support? Could it have engaged with the villagers better? How should POSCO
react if such instances repeat in the future? (Figures 1 to 3)

Additional information
Integrated steel plant
 12 million tons per annum (MTPA) (three phases ⫻ four MTPA each), reduced to eight
MTPA (two phases ⫻ four MTPA each) after difficulties acquiring land.

Mine
 600 million tons of captive iron ore over 30 years, in Keonjhar and Sundargarh districts
in Khandadhar hills; and government supported access to an additional 400 million
tons on open markets.

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

 



GOA 5.09

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES

KERALA 7.05

plant;
HIMACHAL PRADESH 8.06
SIKKIM 8.19

0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
PUNJAB 8.26
Kerala
Delhi ANDHRA PRADESH * 9.2

VOL. 8 NO. 4 2018

Himachal Pradesh JAMMU AND KASHMIR 10.35

plant site (Table I).

Goa HARYANA 11.16

Infrastructure and townships

Punjab UTTARAKHAND 11.26

Gadakujanga panchayats;
NE (excluding Assam)
TAMIL NADU 11.28
Maharashtra
MEGHALAYA 11.87
Tamil Nadu
Haryana TRIPURA 14.05
Jammu and Kashmir RAJASTHAN 14.71
Gujarat GUJARAT 16.63
Karnataka

500-acre township near mining site; and

MAHARASHTRA 17.35
West Bengal
NAGALAND 18.88
Uarakhand
Andhra Pradesh WEST BENGAL 19.98
Assam MIZORAM 20.87
Figure 1 State wise poverty ratio of major states in India

Rajasthan KARNATAKA 20.91

Uar Pradesh ALL INDIA AVERAGE 21.92
Jharkhand
UTTAR PRADESH 29.43
Madhya Pradesh
Bihar MADHYA PRADESH 31.65
Odisha ASSAM 31.98
Figure 2 State wise Human Development Index of major states in India

Chhasgarh ODISHA 32.59

Naonal average BIHAR 33.74
ARUNACHAL PRADESH 34.67
MANIPUR 36.89
JHARKHAND 36.96

Captive power plant –1300 Mega Watt (MW) per annum capacity, to be included in
1,500 acre township (segregated between Koreans and Indians) adjacent to
Captive port at mouth of Jatadhari river, 10 km from Paradip, in Dhinkia, Nuagaon and
Figure 3 Location of the project

Table I Time line of the POSCO-India project

Time Event

June 22, 2005 MoU signed between Orissa government and POSCO-India, subsidiary of the POSCO Corporation of
South Korea
August 2005 POSCO Pratirodh Sangram Samiti (PPSS) formed to oppose the project
August-November 2005 POSCO-India commissioned studies on rapid environment impact assessment (REIA) of steel plant
(only for 4 MT) along with captive power plant and separately for the captive minor port
April 2007 POSCO applied to MoEF for environmental clearance for the steel plant
July 2007 MoEF granted environmental clearance for steel plant to POSCO with certain conditions
August 2008 India’s top court upholds “in principle” clearance for use of forest land for the project
August 2009 MoEF granted clearance for diversion of forest land
January 2010 MoEF informed Government of Odisha that the final approval for the diversion of forest land is
conditional and depends on the settlement of the rights of forest dwellers. In turn, Government of
Odisha replied the ministry that there are not any traditional forest dwellers
May 2010 Around 30 people are injured in clashes between police and the members of the PPSS. The clashes
occurred when the police forcibly tried to move demonstrators from the project site
July 2010 Odisha high court canceled mining lease for iron ore mine to POSCO and the state government
decided to challenge it in the Supreme Court of India
January 2011 Final environment clearance for the project granted. But petitioners filed a case at the National Green
Tribunal (NGT) challenging environmental clearance to POSCO project
December 2011 Violence erupts in Jagatsinghpur. One person is killed and 25 others injured
March 2012 NGT suspends POSCO-India’s EC granted in 2011 and ordered MoEF to carry out a “fresh review” of
EC
July 2012 POSCO submitted a revised proposal to the GoO seeking transfer of 2,700 acre land for the
establishment of 8 MTPA integrated steel plant
July 2012 GoO announced its decision against acquiring about 438 acre of private land for the plant
May 2013 Supreme court of India entrusted upon GoI to decide on the issue of granting mining rights to POSCO-
India taking into consideration the concers of relevant stakeholders
January 2015 Indian Parliament enacted the Mines and Minerals Development and Regulation Amendment
Ordinance making auction a mandatory route for all entities seeking mining leases
2016 POSCO-India has not received mining rights, and no development on project

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

 Notes
1. POSCO Annual report 2009.
2. This part is dramatized based on the newspaper reports https://economictimes.indiatimes.com/
industry/indl-goods/svs/steel/posco-ceo-kwon-oh-joon-calls-pm-narendra-modi-discusses-
investment-plans/articleshow/45954567.cms.and
3. Pictorial description based on the pictures posted on www.narendramodi.in/mr-kwon-oh-joon-
calles-on-pm-modi-7170
4. National Council for Applied Economic Research (2006). Social Cost Benefit Analysis of the
POSCO Steel Project in Orissa. New Delhi: National Council for Applied Economic Research.
5. www.youtube.com/watch?v⫽jv6fEBM0Vdc
6. To divert the forest land for non-forest purposes, clearance under the Forest Conservation Act,
1980 was required.
7. Report of the Committee Constituted to Investigate into the proposal submitted by POSCO-India
Pvt. Limited for establishment of an Integrated Steel Plant and Captive Port in Jagatsinghpur
District, Orissa obtained from http://envfor.nic.in/sites/default/files/report-committee-posco.pdf
(accessed 24 November 2016).
8. Gram panchayat is a traditional form of local government in Indian villages to run the local village
administration.
9. POSCO’s Odisha project: OECD National Contact Point complaints and a decade of resistance
obtained from www.deakin.edu.au/research/research-news/articles/poscos-odisha-project-
oecd-national-contact-point-complaints-and-a-decade-of-resistance (accessed 24 November
2016).
10. POSCO’s Odisha project: OECD National Contact Point complaints and a decade of resistance obtained
from www.deakin.edu.au/research/research-news/articles/poscos-odisha-project-oecd-national-contact-
point-complaints-and-a-decade-of-resistance (accessed 24 November 2016).
11. www.countercurrents.org/iqbal220811.htm
12. https://scroll.in/article/832463/as-posco-exits-steel-project-odisha-is-left-with-thousands-of-
felled-trees-and-broken-job-promises
13. https://timesofindia.indiatimes.com/city/bhubaneswar/Anti-Posco-leader-Abhay-Sahoo-arrested/
articleshow/20008939.cms
14. Apex court stalls Vedanta bauxite mining project in Odisha. Obtained from www.
thehindubusinessline.com/news/apex-court-stalls-vedanta-bauxite-mining-project-in-odisha/
article4629534.ece (accessed 24 November 2016).
15. In a report for POSCO-India, India’s premiere research institute National Council of Applied
Economic Research (NCAER) referred from “Iron and Steel: The POSCO-India story” obtained
from http://miningzone.org/wp-content/uploads/2010/10/Iron-and-Steal.pdf (accessed 24
November 2016).
16. POSCO-India’s reply to the joint allegation letter sent by the United Nation’s special rapporteur on
extreme poverty and human rights. Obtained from http://hlrn.org.in/documents/UN_Documents_
on_Housing_and_Land.pdf (accessed 24 November 2016).
17. Report of the Committee Constituted to Investigate into the proposal submitted by POSCO-India
Pvt. Limited for establishment of an Integrated Steel Plant and Captive Port in Jagatsinghpur
District, Orissa obtained from http://envfor.nic.in/sites/default/files/report-committee-posco.pdf
(accessed on 24 November 2016).
18. www.thehindu.com/todays-paper/tp-national/Naveen-agrees-to-visit-Posco-steel-plant-site/article
16244084.ece
19. NGT Appeal No. 8/2011, obtained from www.indiaenvironmentportal.org.in/files/file/final_order.pdf
(accessed 24 November 2016).
20. The price of Steel.
21. MoEF letter “Integrated Iron & Steel Plant (4.0 MTPA) with Captive Power Plant (4 x 100 MW) at
Kujang, Near Paradip, Jagatsinghpur in Odisha by M/s POSCO India Private Limited – regarding
revalidation of Environmental Clearance.” Obtained from www.indiaenvironmentportal.org.in/files/
file/ec%20to%20posco.pdf (accessed 24 November 2016).

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

22. SC sets aside Orissa HC order on iron ore Licence to POSCO. Business Today. Obtained from
www.businesstoday.in/current/corporate/sc-sets-aside-orissa-hc-order-on-iron-ore-licence-to-
posco/story/194842.html (accessed 24 November 2016).
23. Posco’s Odisha journey: travails of a big-ticket project. Obtained from: www.business-standard.
com/article/companies/posco-s-odisha-journey-travails-of-a-big-ticket-project-115051901647_1. Keywords:
html (accessed 24 November 2016). Business ethics,
24. www.huffingtonpost.in/2015/07/17/posco-may-scrap-odisha-pr_n_7815636.html
Corporate communications,
Corporate social
25. End Of $12bn Dream? Posco May Scrap Odisha Steel Project After A Decade Of Delays: responsibility,
www.huffingtonpost.in/2015/07/17/posco-may-scrap-odisha-pr_n_7815636.html
Crisis management

Reference
Mukhopadhyay, A.D. (2006), “The POSCO deal: boon or disaster? ”, Social Scientist, Vol. 34 Nos 3/4,
pp. 43-54.

Exhibit 1

POSCO’s new stakeholder engagement strategy

In one of the stakeholder interview that POSCO conducted, Mr. Hyung-Cheol Yum,
Secretary General, Korean Federation for Environment Movement describe the Odisha
project in India and the associated environmental safety as the major issue surrounding
POSCO in 2014. He further added
k there was a problem of communication with the NGOs for the Odisha project. Trust should
be built with the stakeholders to communicate effectively. The civic groups’ method of
responding to issues may be provocative at times, but this is aimed at drawing out the action
from the company and this problem can be resolved by enhancing communication with
each other.

Another stakeholder Yoo-Kyung Park Director, APG added- Odisha project of

POSCO-India was wanting in early communication strategy, and thus was not able to
respond appropriately to the risk that could have been avoided. A strategy on how to
communicate with stakeholders such as investors and NGOs and the management’s
sincere commitment to adhere to the strategy are important. Also, the company’s R&R in
the aspect of sustainability management should be made clear to ensure close
communication with the stakeholders.”

Figure E1

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11

 Figure E2

To engage with stakeholders, since 2011, POSCO has been inviting opinion leaders to
hold stakeholder talks with them. At these stakeholder communications, POSCO’s
executives participate in listening to valuable opinions of stakeholders. This helps
POSCO to listen to the opinions of the stakeholders and their view on POSCO’s role and
the ways in which issues concerned with stakeholders can be addressed. This at the
same time this gives stakeholders the opportunity to better understands POSCO.
POSCO implement social contribution project centered on the local communities where
the plants are located.
In this direction POSCO in 2014 revised its Code of Ethics by including clauses on
incorporating rules on respecting human rights. Mentioning human rights in Code
of Ethics signifies POSCO’s commitment to respect human rights as a global
corporation.
Further, to communicate its proactive environmental management perspective POSCO
engages with stakeholders through “Environmental Dialogue”. POSCO’s objective is to
effectively respond to global environmental issues and domestic environmental policies.
POSCO engages with stakeholders from governments, regulators, corporations, academia,
and environmental organizations to advice POSCO on its projects and business directions
(Figures E1 to E3).

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 8 NO. 4 2018

Figure E3

Corresponding author
Shubham can be contacted at: shubham.1913@gmail.com

VOL. 8 NO. 4 2018 EMERALD EMERGING MARKETS CASE STUDIES PAGE 13