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Metals
MOEF clearance for POSCO project: 2% PAT for CSR among 28 other conditions; A precedent being set?
• 2% of PAT to be spent on CSR as part of project approval: The
Ministry of Environment and Forest (MOEF) has given approval to POSCO
for the 12MT steel plant (4MT in the first phase). The integrated steel plant
includes a captive power plant and a captive port as well. The
Environmental clearance for the steel cum captive power plant has
been accorded with 28 additional conditions over and above that
stipulated in the original environmental clearance, while the captive
port comes with 32 additional conditions over and above those
stipulated in the original environment clearance of 2007. Of the
additional conditions, we find the following the most important and which,
in our view, could become precedents for future projects, particularly in
Orissa:
a) “ In addition to fulfilling the R&R obligations mandated by
the State Govt’s package and while also implementing CSR-related
programmes in the construction phase, 2% of the annual net profit
should be devoted to corporate social responsibility in the region where
the project is located.” b) total green area within the plant will be 25% of
its area as per the guidelines of the CPCB; c) should there be a shortage of
water at the Jobra barrage for irrigation purposes, the company would
voluntarily sacrifice water intake for irrigation projects.
• Does the 2% PAT as additional CSR set a precedent?: The Minister in
his comments in the clearance document (available at moef.nic.in) writes
that projects such as POSCO’s have considerable economic, technological
and strategic significance for the country but at the same time, laws on the
environment and forests must be implemented seriously. We believe the
most important question raised by the MOEF clearance with various
conditions is the ‘2% PAT as CSR’ and whether this would be adopted
for other projects. Orissa has a slew of projects across steel and
aluminum which are stuck because of: a) land acquisition issues and/or
b) lack of regulatory clearances. There is a mining bill being proposed
in which there is a clause of 26% profit sharing across existing and new
mining projects.
• Forest clearance dependent on assurance from state governments: The
project requires 1625 hectares of land, of which 1253 are forest land. As part
of the forest clearance, the document highlights “the pointed assurance
sought from the state government in keeping with its obligation under the
Forest Act 2006.”
• Any read-throughs for the bauxite mining/alumina refinery of VAL?: In
our view, there are no particular read throughs for bauxite/mining alumina
refinery as the issues impacting STLT/VAL are different.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Metals
MOEF clearance for POSCO project: 2% PAT for CSR among 28 other conditions; A precedent being set?
• 2% of PAT to be spent on CSR as part of project approval: The
Ministry of Environment and Forest (MOEF) has given approval to POSCO
for the 12MT steel plant (4MT in the first phase). The integrated steel plant
includes a captive power plant and a captive port as well. The
Environmental clearance for the steel cum captive power plant has
been accorded with 28 additional conditions over and above that
stipulated in the original environmental clearance, while the captive
port comes with 32 additional conditions over and above those
stipulated in the original environment clearance of 2007. Of the
additional conditions, we find the following the most important and which,
in our view, could become precedents for future projects, particularly in
Orissa:
a) “ In addition to fulfilling the R&R obligations mandated by
the State Govt’s package and while also implementing CSR-related
programmes in the construction phase, 2% of the annual net profit
should be devoted to corporate social responsibility in the region where
the project is located.” b) total green area within the plant will be 25% of
its area as per the guidelines of the CPCB; c) should there be a shortage of
water at the Jobra barrage for irrigation purposes, the company would
voluntarily sacrifice water intake for irrigation projects.
• Does the 2% PAT as additional CSR set a precedent?: The Minister in
his comments in the clearance document (available at moef.nic.in) writes
that projects such as POSCO’s have considerable economic, technological
and strategic significance for the country but at the same time, laws on the
environment and forests must be implemented seriously. We believe the
most important question raised by the MOEF clearance with various
conditions is the ‘2% PAT as CSR’ and whether this would be adopted
for other projects. Orissa has a slew of projects across steel and
aluminum which are stuck because of: a) land acquisition issues and/or
b) lack of regulatory clearances. There is a mining bill being proposed
in which there is a clause of 26% profit sharing across existing and new
mining projects.
• Forest clearance dependent on assurance from state governments: The
project requires 1625 hectares of land, of which 1253 are forest land. As part
of the forest clearance, the document highlights “the pointed assurance
sought from the state government in keeping with its obligation under the
Forest Act 2006.”
• Any read-throughs for the bauxite mining/alumina refinery of VAL?: In
our view, there are no particular read throughs for bauxite/mining alumina
refinery as the issues impacting STLT/VAL are different.
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