Posco’s stiff terms threaten JV with Sail

“After several rounds of negotiations,it has emerged that the cost of producing 1.5 MTPA Posco has been proposed at about Rs 14,000 crore,which is unheard of. The thumb rule for producing 1 MT steel is about Rs 4,000 crore,then why this exorbitant figure,” a senior government official told The Indian Express. Adding fuel to the fire,Posco has demanded a majority stake in the proposed JV stating it will not settle for anything less. “The proposed shareholding issue was not what we had bargained for. This is because a certain section of the ministry feels that if Posco has a majority stake,then it could amount to Sail putting its money in a private entity,” the official said.

Posco’s refusal to transfer the FINEX technology to Sail has not gone down well with both the steel ministry and Sail. Refusing to transfer the patented technology,Posco has made it clear it could only share it with the JV. This,the ministry finds unreasonable as Posco was getting land from the PSU,but was reluctant to transfer the technology. The ministry is also apprehensive about the FINEX technology itself,which Posco has steadfastly refused to partake.

“We are also unsure about the FINEX,primarily because we are told that it has not been tried anywhere else except South Korea. If it was so good then why other global steel giants did not opt for it?” the official asked. When contacted,a senior Posco official said there were no major differences and the modalities on Internal Investment Returns (IRR) were being worked out.

Steel secretary Pradeep Kumar Misra is expected to lead a high-level delegation to South Korea soon to resolve these issues,but past negotiations have shown that Posco has been firm on its stand. There was also another irritant that the Korean government held a stake in FINEX and hence talks need to include the government in Seoul too. If these differences were not resolved,it could derail preliminary talks between Sail and Posco for setting up another 300,000-400,000 tonne Cold Rolled Non Oriented steel mill in Maharashtra,at a cost of Rs 15,000 crore,for which feasibility study is reportedly on.