POSCO India - Claimed Benefits From POSCO India Project

Claimed Benefits From POSCO India Project

India’s National Council of Applied Economic Research completed and published in January 2007, its report on the social cost benefit analysis of Posco India project. This research team considered two alternatives: producing steel within the state of Odisha versus mining the iron ore, exporting it and importing the steel. The report claimed mining iron ore and producing steel locally in the state of Odisha is significantly better option for India, over the option of India exporting lower cost iron ore overseas, encouraging other countries to produce the steel, and then India importing the higher cost produced steel. The report also claims:

  • an economic internal rate of return to India from the POSCO project to be 16.6%
  • sensitivity analysis indicates that even in the worst case scenario — sales 10 per cent lower than estimated — the economic return to India to be 13.9%.
  • the economic impact of the Posco India steel plant alone, to India’s population, to be Rs. 112 billion ($2.5 billion) assuming a discount rate of 12%.
  • the project additionally will contribute direct and indirect taxes as the iron ore is mined, steel is produced, the metal is converted into products by Indian economy, and these steel products are consumed in various sectors of Indian economy. The report claims the Posco India project will produce an average of Rs. 249 billion per year ($5.44 billion per year) of steel for India’s economy, contribute an average of Rs. 49.9 billion per year ($1.1 billion per year) of domestic sales taxes, capital goods taxes, value added taxes (VAT), iron ore duties, and employee income taxes, annually for 35 years, for the social programs of the central government of India and state government of Odisha. The report admits that its analysis is based on nominal numbers using 2007 basis, that it assumes constant steel prices at $450 per tonne through the year 2040, and ignores the effect of inflation in steel prices or in Indian economy. The carbon steel prices between January and July 2011 ranged between $815 to $910 per tonne.
  • the POSCO India project’s FINEX process, the report claims will be superior in preventing air pollution in India. It will be 10 times less polluting in sulfur oxides (SOx) emissions than currently used BF process in India. The POSCO process, the report claims, will also be 25 times less polluting in nitrogen oxides (NOx) and 5 times less polluting in particulate dust terms than the process currently used by steel plants of India.

These claimed benefits are disputed as incomplete. For example, activists claim that land acquisition for Posco India will adversely affect betel farmers who in recent decades encroached upon government land to farm betel leaves and claim to earn INR 10 to 17.5 lakh (US$ 30,000) per hectare per year from growing betel leaves for paan.

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