By Our Correspondent in Bhubaneswar, February 5, 2015 :

South Korean steel maker Posco’s search for captive iron ore mine for its $12 billion steel project in Odisha seems to be over with the Indian government deciding to use the auction route for allocation of all minerals.

This was made very clear by union steel and mines minister Narendra Singh Tomar said on Thursday.

“Even I will have to bid to get a mining lease,” he said, putting an end to Odisha government’s demand for allocation of Khandadhar iron ore mine to Posco for its steel project near Paradip port in the state.

The state government had made firm commitment to allot Khandadhar as captive mine to Posco for its steel project. The South Korean major had been insisting that the captive iron ore mine is the only plus point Odisha had been offering to make the steel company interested to set up the plant in the state. The mine could not be leased out in favour of Posco due to regulatory roadblocks and local opposition.

The Naveen Patnaik government had been arguing that prior commitment to corporates should be honoured under the new dispensation to avoid sending a wrong signal to investor community.

“It was an international commitment and we had recommended on the basis of the request made by the (previous) central government,” Odisha’s steel and mines minister  Prafulla Kumar Mallik said. “If POSCO will have to bid, it will be a setback for the project.”

Posco had signed a memorandum of understanding with the Odisha government that assures allocation of mining leases, but the renewal of the MoU, which expired in June 2010 five years after it had signed with the state government, has not yet been done.

In fact there were more than 200 applicants for the Khandadhar iron ore deposits, but the state government had recommended the lease for Posco, calling the project the biggest FDI in the state by invoking Section 11 (5) under the previous MMDR Act, 1957 for making the special recommendation for Posco.

But with the promulgation of MMDR Amendment Ordinance 2015, which makes allocation of all mines through the auction route only, the renewal of MoU has become redundant.

With the Centre firm on the auction route for allocation of all minerals, the fourth largest steel maker  will no longer have the first right on the mine and will have to bid for it.

“Under the MMDR Amendment Ordinance 2015, it is not possible to offer the Khandadhar mine to Posco on preferential basis and this chapter is now closed. It will have to secure this mine by bidding,” officials said here.

In the wake of the multi-billion rupee mining scam, the Narendra Modi government is not taking any chances to compromise on transparency overlooking Supreme Court’s observations on mine allocations in the past.

The Centre blamed the Odisha government for its failure to meet the technical requirements before the Ordinance as was sought by the Centre on notified and non-notified areas of the block spread over 2,500 hectares which state had decided to offer to Posco in 2009.