LETTER FROM MR. JUAL ORAM TO MR. NAVEEN PATNAIK
A number of news items have come up in the media in the recent past
regarding POSCO and our statements have found place in these news. The
opponents of our alliance have got certain encouragement on the POSCO issue
for which I personally feel sorry. I want to convey my views through this
letter it is my personal capacity as well as the President of BJP State Unit
for strengthening the alliance and at the same time I would expect that you
would also try to strengthen the BJD-BJP alliance in the State.

I whole-heartedly welcome the investment of POSCO, through this letter and
support the decision of the Government. But I want some clarifications
regarding signing of the MoU with POSCO. I hope that as the Chief Minister
of the State you will personally intervene and clarify the points for the
healthy continuance of the alliance in the interest of the State.

It has been mentioned in the MoU that Indian iron are contains more alumina
for which 30% of the ore will be exported and an equal amount of ore will be
imported from Brazil having less alumina contain so that high quality steel
can be produced. Here my question is from which country iron ore has been
imported so for production of steel in India?
So far as my knowledge goes, iron ore was not imported from any country to
India for production of steel. On the other hand, iron ore has been exported
to the countries like China, Japan, and South Korea. It would not be out of
place mention here that if POSCO was getting iron ore having less alumina
content in Brazil, then it would not have been interested in setting up of a
steel plant in India and in particular, Orissa.

The second question is that before signing of the MoU, Govt. of Orissa
should have ascertained if the Government of Brazil has given its consent
for export of 30% of Iron Ore from their country, before agreeing to allow
export of equal quantity of ore from Orissa. The consent letter should have
been produced to the Government of Orissa by POSCO. In addition Government
of Orissa should have ascertained the terms and conditions of POSCO
agreement for conducting business with Brazil. As stated in the letter
written by Sri Braja Kishore Tripathy, former Minister of Steel, Government
of India and the leader of your party in Lok Sabha, I understand Brazil has
imposed a condition for selling iron ore to POSCO which is at market rate
due to which POSCO withdrew from Brazil, and expressed its interest to set
up a Plant in India. Therefore the factual position and the provision made
in this regard in the MoU should be clearly spelt out with regard to Import
and export of the ore.

My third question is whether any foreign company has so far been sanctioned
any mining lease. Is there any precedent? You as the popular Chief Minister
of Orissa have proposed in the MoU that mining lease will be sanctioned in
favor of POSCO. The Company sanctioned with mining lease will pay Rs.50 to
Rs.100/- towards royalty to Government per tonne. That means for one tonne
of iron ore the Company will spend Rs.400/- to Rs.500/-. The Company after
getting lease will pay Rs.450/-to Rs.500/- per tonne of iron ore in toto. On
other hand, if the Company purchases iron ore from the open market, it has
to spend Rs.1500/- to Rs.1700/-per tonne. As the Chief Minister you should
try to generate more funds for the State. It is therefore that I wish to
draw your attention through this letter to rectify the wrong decisions which
it& has been taken by you.

The Govt. of Orissa, has already signed MoU with 36 companies prior to
signing the MoU with POSCO. These 36 companies in their respective MoUs have
been asked to purchase iron ore from either the Orissa Mining Corporation or
any private agencies for use in their steel plants. These 36 companies will
purchase iron ore at the market rate of Rs.1500-1700/-per tonne for running
their plants whereas POSCO will purchase it at the rate of Rs.450-500/- for
running its plant. This seems like an undue favor being shown to a foreign
company and a step-motherly attitude to indigenous companies. In light of
this I demand that POSCO should be treated at par with the indigenous
companies for purchase of iron ore and accordingly, the MoU should be
rectified.

After signing of the MoU with POSCO, through the media I learnt that Paradip
would be declared as the Special Economic Zone to facilitate the setting up
of the POSCO steel plant. As per the definition of Special Economic Zone no
tax can be imposed on import or export into the SEZ area. In addition you
also cannot impose sales tax and entry tax. Thus, Orissa will be debarred
from getting any revenue. Perhaps this has not been brought to your notice
by the senior officers of the Govt. .

It has been printed by the media that after setting up of the POSCO plant in
Orissa 13,000 persons will get direct employment and 35,000 persons indirect
employment. I would like to draw your kind attention to the website of POSCO
wherein it is mentioned that they have an employees strength of 19,000
persons for its entire production of 31 million tonnes of steel making
throughout the world.
The process through which POSCO produces steel is the most modern and
scientific, and for this process, the least manpower is required. Hence,
those who would serve there are normally skilled workers. On a rough
estimate, a maximum of 2500 to 3000 people will be employed in a Steel Plant
of POSCO size. The number of persons who are to be displaced is
approximately 40,000, the relief and rehabilitation measures will be
miniscule, and therefore will it be a logical to displace 40,000 persons at
the cost of providing jobs to 2500-3500 persons?

The IPR-2001 was amended on the eve of the MoU signing to favour POSCO, The
clause in the IPR that a company after investing 25% of its project cost
would be eligible for sanction of mining lease. But in case of POSCO, you
have changed it and agreed to give them mining rights prior to investment.
What was the fault of the 36 companies who have already put more than 25% of
their project cost for getting eligible to apply for mining lease? I hope
you will look into this issue.

As the former Minister of Steel, Government of India, you are aware that
indigenous steel making requires. 1.6 tones of iron ore for producing one
tonne steel. Then what is the reason for granting and recommending excess
iron ore reserves to POSCO? 70% steel producing companies of the country are
waiting for grant of mining lease including the 36 companies who have signed
MoUs with Orissa. But instead of their cases being considered, why is it
that POSCO is being given preferential treatment?

It seems that some senior officers who have misguided you in signing the MoU
with POSCO. For example, the project cost per tonne of steel produced by
these 36 companies has been shown to be more than POSCO. It was initially
known that the project cost would be Rs.39,000 crores but later on it has
been stated to be Rs.51,000 crores. I feel that through excessive media
propaganda that it is the largest Foreign Director Investment Project in
India, the attention of the people of the State has been diverted from the
main drawbacks in the MoU. That is why I feel it proper to mention to you
that there was a similar project "Enron" in Maharashtra which had inflated
its project' cost. The consequence of which is before the country today?

Many companies and individuals are coming forward to set up industries in
Orissa because they find in you a very capable and transparent Chief
Minister. The other reason for it can be ascribed to valuable mineral
wealth, water and energy, which are found aplenty here. Hence, as a personal
friend and well wisher, it is my responsibility and duty that you should not
get swayed by wrong advice, that POSCO is showing compassion to poor state
like Orissa. But it is my considered that POSCO has hatched strategy to look
the valuable mineral wealth of Orissa.

Initially, you were obtaining approval of cabinet before signing of any MoU
with Companies. So far as my knowledge goes, in the last three MoUs
including POSCO, you have not taken the Cabinet into confidence. The media
and political opponents have cited that the MoU have been signed in haste,
and the transparency that your Government is known for has been ignored.

However, as you have only signed the initial MoU, you have scope to consider
and having a re-look minutely into each and every clause at the time of
signing of final MoU keeping the larger interest of the State in mind and
maintaining transparency so that the image of our Government headed by you
is not tarnished.

POINTS TO BE CONSIDERED BEFORE ENTERING FINAL AGREEMENT WITH POSCO

1. Before signing the final agreement with POSCO of South Korea the
following points needs to be considered for the interest of the Orissa State
and for the greater interest of the nation.

2. What is the role of Union Government before signing the POSCO MOU towards
the various terms and condition. They must clear it because the Orissa
PCC-President first welcome the MOU after that he opposed the MOU. So what
is the correct stand of the Congress party they must clear it.

3. In which rule and the act the POSCO MOU will be governed. Whether mines
and minerals development and regulation act is applicable to this MOU ?
Whether any other law is also applicable to this MOU, what are those act and
regulation. If mines and minerals development regulation is applicable to
this MOU then what will be the nationality clause of that act whether this
clause will be amended ?

4. Wheather POSCO have entered a joint venture agreement with BHP Billiton
of Australia to get long term supply of IRONE ORE and the name of the joint
venture is POSCOMAC. Also the company have entered another joint venture
agreement with the Brazilian company CVRD to get long term supply of IRONE
ORE and the name of the company is KOBRASCO. What are the term and condition
of those joint venture agreement. Is there any SWAPING clauses in those
joint venture agreement in Australia and Brazil.

5. Up to which grade of Iron Ore the Union Commerce Ministry have allowed to
export ? Is it a fact that more than 64% of Iron Ore is not allowed to
export to any other country for the greater interest of our country. Whether
high grade of IRONE ORE which are not allowed .

6. How much iron, manganese, coal and other ore reserve (in million metric
ton) in India. Whether the mineral reserve (quantity wise and quality wise
reserve) are insufficient for future generation. America has huge reserve of
oil are they not trying to get from the other country ? For what reason they
are adopting this policy.

7. Government of Orissa have signed 36 MOU before signing with POSCO. How
many cases out of this 37 cases have been recommended by the state
government for granting mining lease to the Union Government ? Whether the
government of Orissa have assured the POSCO company in the MOU to
recommended mining lease after surrendering the lease hold of the state
owned ORISSA MINING CORPORATION, if yes which are those areas ?

8. Before sinning the MOU with POSCO whether Union Government have obtained
the Environmental Impact assessment study in and around the Paradeep area
where the 1999 super cyclone hit was the worse compared to that of other
part of costal area of Orissa state.

9. As per the answer given by the Union Steel Minister to an unstared
parliament question No-220 dt. 25/7/2005 the POSCO company is going to use
FINEX process in its proposed steel plant at Paradeep Orissa if that be the
case than why the company will be allowed to SWAP certain quantity of the
IRON ORE allotted to them because in FINEX process cheaper IRON ORE and low
ash non-cooking COAL will be used as feed stock which is plenty available in
India

10. Whether the project cost shown in the MOU of the POSCO company is in the
higher side compared to the project cost submitted by the other indigenous
company. Whether the POSCO company will also raise capital from the Indian
market if yes what is the amount ? Whether the Union Government has given
FDI clearance to this company detail if any ?

11. Whether it is a fact that NMDC, MMTC and GOA are supplying IRON ORE and
fines to the South Korean Company POSCO from the year 2000 till date from
Ballery-Hospet region of Karnataka. Whether POSCO have a along term contract
agreement with MMTC to supply IRON ORE lump which valid up to the year
ending 2006. What are the terms and conditions of this supply agreement.
Whether MMTC is supplying the iron ore at prevailing market rate ?

12. What are the chemical composition of the above supplied IRON ORE per
each shipment and what is the approximate quantity of IRON ORE supplied to
POSCO from the year 2000 to till the end if the financial year 2004-05.

13. Is it necessary to have a cotton field to have a textile mill or have a
sugarcane field to have a sugar mill, the answer is obviously "NO" it is not
necessary or mandatory. Like wise to have a still plant the mines is not
necessary and the vice-verse.