POSCO PESTLE ANALYSIS

Political framework:
In India, the government- corporate nexus, as far as iron ore mining goes, has been a very
symbiotic one. POSCO managed to garner all the state support it had needed to set up a
steel plant and all its backward and forward linkages. India allows 100% FDI in this sector
and has intentionally kept the royalty charges and excise duties low to attract investment;
high purchasing power and availability of cheap labor only help the cause. Fluctuations in
the global market makes employment in such an industry very unstable. Granting SEZ status
for tax exemptions and holidays would surely cost the Centre and the State a loss of revenue
at the expense of its own people. Acts like PESA, FRA and the Samata judgement try to
protect the interests of the tribal people. But the Land Acquisition act has countered all the
effects. The government has, over the years, looked at environmental and social regulations
as impediments to development of this industry and looks forward to more deregulation and
devolution.
Environmental Framework:
Approximately 3566 acres of land is government land, recorded as forest land or anabadi.
These forests used to protect villages against cyclonic storms and provide basic needs of
firewood and stalk for betel vine cultivation. The destruction of the forests under the project
will cause the above problems and the following environmental problems.
Any damage to the coastline by the construction of the port could pose a threat to the
nesting habitat of the endangered Olive Ridley turtles. Port would also affect the livelihood
of the fishing communities. On creating the port, the river will be blocked and the area will
get waterlogged as Jagatsinghpurs rainfall drains into the sea through the Jatadhari River.
Drawing millions of liters of water from Mahanadi River will lead to acute water shortage.
Dumping of waste from mining sites on agricultural land has contributed to land pollution.
Iron Factories are spewing poisonous gases in the air and are also releasing harmful
chemicals which get mixed with water.
Social Framework:
The various social factors affected by POSCOs business in India are land, livelihood and
cultural issues. With the setup of the plant in Jagatsinghpur district, the acquisition of 438
acres of private land has affected seven revenue villages comprising 11 hamlets in three
gram Panchayats in Kujang tehsil i.e. a population of 22,000 will lose their land. The
population is dependent on cultivation and production of beetle leaves and cashews which
are their major source of livelihood, income and survival. As the land gets acquired, the
history of the place will be lost, lowering the traditional and cultural importance. The
majority of the youth in the area is unskilled and training them to be skilled should be one of
the priorities so as to improve their lifestyle. The project does not promise jobs to all the
affected people and thus many shall become unemployed endangering their survival.
Technological Framework:
POSCO is a game changer implementing technology to reduce production costs. Its patented
technology, "Finex process", reduces the amount of expensive coke coal used in making the
steel. This reduced the cost by Rs. 2000/ton compared to other steel manufacturers. POSCO
allowed MESCO to use this technology for a 26% stake in the JV. POSCO planned to set up a
12MTPA capacity plant. Compare this with the output of 165 million tons produced by the
entire country. That is 7.2% of the entire country's capacity just from one plant. This is huge.
The project has three parts, the plant, the port and the captive mine. Apart from this, the
company also has to lay tracks from the plant to the Paradip port. With POSCO, we have also
seen the use of broadcast media and social media to influence peoples opinion.
Legal Framework:
There were many legal factors in play with POSCOSs ambition of setting up steel plants,
captive port and mining facilities in Orissa. With the opening of the economy in 1990s and
changes in mining, mineral policies & regulations, a great push was provided to the mining
related activities in India. One of the major changes was raising the cap on Foreign Direct
Investment to 100 percent in February 2000. The archaic and draconian Land Acquisition
Act, 1894 continued to facilitate acquisition of private lands forcibly in the name of public
purpose even for private mining activities.

But it faced many other legal problems in the laws like Forests Rights Act 2006 which granted
certain rights to forest-dwelling communities in India, including the use of forest land and
other resources which made life difficult for POSCO to acquire land.
There were problems with the legality of the MoU signed with the state government. POSCO
had to scale down on its ore requirement and operation time period. The National Green
Tribunal (NGT) also found inadequacies in the environment impact assessment report of the
project.
Economic Framework:
Various Economic factors directly impact the POSCO investment in Orissa and how these
factors lead to advantages and disadvantages on the economic front. Posco will invest 12
billion dollars to build Special Economic Zone (SEZ) .Direct and indirect employment to
18,000 and 30,000 people, respectively. Development of road, rail, and port infrastructure
coupled with integrated township spread over an area of 2000 acres will promote
industrialization in Orissa which would drive economic growth.
On the other hand the steel plant is ought to affect the revenues of seven villages including
Gadkujang Panchayat, Dhinkia Panchayat, and Nuagaon Panchayat. Generation of mere
48000 jobs as opposed to the estimated 2.5 lakhs that were affected due to displacement of
the project would generated unemployment in Orissa. POSCO that had promised a flat
royalty rate of Rs 27/ton of iron ore to the Govt. of Orissa would amount to loss worth Rs
240,000 crores. Due to the grant of the SEZ status, the central govt. is predicted to incur
loss worth Rs 89000 Cr. and state of Orissa an additional of 22000 Cr. over next 30 years.