POSCO to start work on steel plant in coming weeks: Prime Minister

South Korea's POSCO will be able to finally start work on its planned $12-billion Indian steel plant over the coming weeks, India's prime minister said on Thursday, after being stuck on the drawing board for eight years.

Manmohan Singh also said the firm's request for an iron ore mining license - the final regulatory hurdle for the project which would be the biggest foreign direct investment in India - was in "advanced stage of processing".

The 12 million-tonnes-per-year plant will help India, the world's No.4 steel producer, to expand output. India produced 77.6 million tonnes in the past fiscal year, just a fraction of top producer China's nearly 800 million tonnes last year.

POSCO has already received a go-ahead from India's environment ministry for the plant.

South Korean President Park Geun-hye's ongoing visit to India seems to have pushed forward the project that has been hobbled by delays in getting clearances, acquiring land and obtaining an iron ore mining licence.

"I am very happy that the large-scale POSCO steel project in Odisha is set to be operational in the coming weeks, following the revalidation of its environmental clearance," the Indian prime minister said after a meeting with Park, referring to the start of construction work for the project.

"Grant of mining concession for the project is also at an advanced stage of processing."

Obtaining a mining licence for the plant in eastern Odisha would mean clearing the last major hurdle for POSCO. Reuters reported in July that India's mines ministry was in favour of giving a licence to POSCO.

The company is expected to be given a prospecting licence, which is generally valid for three years and after which a prospector needs to apply for a mining lease.

Access to iron ore, the main raw material in making steel, is the most important factor in POSCO deciding to set up the plant in India, experts have said. POSCO officials say the company came to India to have a strong base in an emerging economy as its presence in China was below expectation.

POSCO first signed an agreement with Odisha in June 2005 to set up the plant on 4,004 acres of land. It is seeking 2,700 acres to begin the project's first stage, which involves setting up two 4-million-tonne plants in two phases.

More than 1,700 acres have already been handed over to the company, Trade Minister Anand Sharma said on Wednesday.

"We'll do everything possible to have the project expedited," Sharma said.

POSCO has said if it gets the required land this year, the first-phase of the plant may be commissioned sometime in 2018.

POSCO may have received most of the government clearances but it is still waiting for India's environmental court to lift a ban on felling trees for the project. The court's order was pending the environment ministry's revalidation of lapsed clearance for POSCO, which finally came through last week.

Though the company hopes the court will remove its order, it could still face some protests from environmentalists and other activists.

Copyright: Thomson Reuters 2014