Economy
Park Geun-hye visit augurs well for India-South Korea Relations

There are opportunities galore for both the countries in terms of Korean investment in India

India's single largest foreign direct investment (FDI) project, the $12 billion (estimated at Rs52,000 crore) POSCO steel plant in Odisha, got the necessary clearance before the arrival of Park Geun-hye, president of South Korea.

 

It may be recalled that the former environment and forests minister, Jayanthi Natarajan, had claimed, time and again, that there were "no pending issues" with her. The new minister, who took over her mantle, Veerappa Moily, gave the required clearance for the project.

 

The POSCO plant will initially produce eight million tonnes of steel, and when the fully required space is made available, they plan to increase the same to 12 million tonnes in the 2nd phase of the project

 

It is not that there are no hiccups in projects of this size and magnitude. Totally, around 2,700 acres of land has been acquired by the Odisha government, but approval for land (13%) is pending before the National Green Tribunal. In any case, all the land will not be required at the start, so the first phase work can commence, and, in due course, other areas can be covered.

 

Local villagers are planning protests, spearheaded by Kanchi Kohli of Kalpavriksh Environmental Action Group (KVEAG), and Posco Pratirodh Sangram Samity are likely file petition against the environment ministry for giving this clearance.

 

The Ministry of Environment and Forests (MoEF) clearance covers only the POSCO steel plant, while it excludes the port. This aspect has been questioned by the deputy director general of Centre for Science and Environment (CSE), who feels that the both the plant and port needs are interlinked and this has also been the view of government's own Appraisal Committee.

 

Now, let us take a look at the port issue, which has been "separated" from the POSCO steel plant itself, for the purpose of clearances. While Posco wants to set up its own captive port facilities, some ten kilometres from the existing port, the Paradip Port Trust (PPT) has made several proposals to Posco. The first covers PPT's willingness to build six new berths in its port to meet Posco's needs, some of which could be leased out on a long term basis to Posco, for their captive use; second covers a joint venture, between PPT and Posco, to take care of both imports and exports of Posco; and the third covers PPT's willingness to have a conveyor system linking the port to Posco plant, since the distance between the two is about 10 Kms only. It is hoped an amicable solution will be arrived at, as the major hurdle on environment has been overcome. It may be borne in mind that POSCO group are specialists in steel and have no port handling experience, as such.

 

As the plan stands today, iron ore is to be sourced locally, but coal will have to be imported, as Coal India are fully committed to meet commitments already made, even where they are failing to supply under fuel-supply agreements (FSAs). Unless Coal India is able to dramatically increase their production, coal imports will be a necessity for POSCO.

 

The Indian government had not favourably reacted to the proposal of Posco that they may be allowed to export iron mined by them, if and when a captive mine is offered. It may be a good idea for the central government to consider possibilities of offering captive coal and iron ore mines to POSCO, if such a scope exists in and around Odisha itself. This is an innovative area, which needs to be studied seriously.

 

Park Geun-hye, the South Korean President was accompanied by her Foreign Trade and Minister for Science and Technology, as the bilateral trade has amounted to over $18 billion in 2012, with a favourable balance for South Korea.

 

To offset this imbalance India needs to explore ways to increase its exports to South Korea in the field of pharmaceutical industry and through IT companies.

 

Between April 2000 and October 2013, South Korean investments in India amounted to $1.3 billion, as per data issued by the Department of Industrial Policy and Promotion. Recently Samsung Electronics have planned to invest $250 million in Haryana to manufacture mobile phones. As against this, Indian companies, such as Hindalco, Mahindra & Mahindra and Tata Motors have made investments in Korea to the tune of $1 billion, and the deficit stands out at $ 8.9 billion favouring Korea.

 

During this visit of President Park, both the countries have signed nine projects, and when they showed interest in Nuclear Power plants, India has conveyed that this could be taken up in phase II when they go in for larger nuclear plants. The civil nuclear agreement with South Korea was completed in just two rounds of negotiation, but before any allotment for the nuclear park to Korea Electric company, on similar lines extended to US, French and Russian companies, India favours a technology demonstrator unit, because the Department of Atomic Energy is unfamiliar with the Korean design. This is likely to take some more time to materialise.

 

On the whole, this visit of President Park has revived great interest in the development of all round relations between both the countries. Now South Korean nationals can obtain tourist visa on arrival in India; there are prospects for setting up Korean banks in India, though the state run India Infrastructure Finance Co Ltd (IIFCL) funds the Korean companies’ participation in India.

 

With the initial clearance of Posco, there is likelihood of many South Korean companies, such as Samsung, GS Engineering and Hyundai to invest in the near future in India's infrastructure developments.

 

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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