Posco India expected to start steel plant construction promptly after signing the 2005 MoU. However, the company was unable to start construction because of social and environmental controversies.
A year after the 2005 MoU was signed, India's parliament passed a new law, which directly affected Posco-India. This law, The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, is also commonly called as the Forests Rights Act. The law granted certain rights to forest-dwelling communities in India, including the use of forest land and other resources. This law has been controversial and is opposed by environmentalists and wildlife conservationists, who petition that the law makes it impossible to protect forests from human presence and use, and for the purposes of ecological and wildlife conservation. The Forests Rights Act was published in 2007, and became effective in 2008. This law was retroactively applied to the Posco-India project.
India's Supreme Court examined the facts related to the state government of Odisha's initiatives to enter into MoU to encourage economic growth in the state, and whether such development meets the intent of ecological and environmental laws of India. On August 8, 2008, the Supreme Court ruled in favor of the state of Odisha, in Case Law I.A. number 2134 of 2007, titled T.N. Godavaraman Thirumulpad vs. Union of India, State of Odisha and others. In their ruling, the Supreme Court justices wrote, "the State of Odisha to be associated with Special Purpose Vehicle in order to ensure implementation of proper schemes for the development of the tribal area and in our Order it has not been suggested for incorporation of the Special Purpose Vehicle to take over the mines which have been leased out by State of Odisha to the lessee. The reason is obvious. We cannot change leases/MoUs/joint venture agreements signed between the parties at earlier point of time which have been approved by the Ministry of Mines, Government of India, and other Authorities. The object for passing the Order was to strike a balance between development and environmental protection. The Lanjigarh tehsil in Kalahandi district, as stated in our Order dated 23.11.07, faces abject poverty. At the same time the area is eco-sensitive area. We have tried to strike a balance in order to subserve the principle of Sustainable Development."
The August 2008 ruling by Supreme Court of India also instructed the Ministry of Environment and Forests (MoEF) of India to examine, and then if appropriate, grant approval under the law. The Ministry of Environment and Forests of India accepted the ruling and examined the facts and reviewed the facts under Indian laws, including the Forests Rights Act. The review process included a committee that visited Odisha many times, including the Posco-India's planned site, the villages, the Forests covering the proposed plant site and iron ore mining area, environmentalists, ecologists, social activists, farmers, and families that may be affected by the proposed Posco-India initiative. The review process by Ministry of Environment and Forests of India took over 2.5 years.
Read more about this topic: POSCO India