Crm - Pasco Case Study

8/3/2019 Crm - Pasco Case Study

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Country Risk Management

PASCOs Investment in India

A case study

By Porf:S.B. Choughule

Project
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PASCO

I initiated the PASCO projects inShanghai. But here the problems are very

complex. The social, Political and

economic environment is very different.

-----Soungsik Cho---------

PASCO India Chairman and Managing Director
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Highlight of Investment

POSCO-Pohang Steel Company

South Korea

4th

largest steel maker in the world 12 Billion USD=54,000crore investment

Single Largest Investment in the Country

Biggest green field project in the world


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Highlight of Project -1

Integrated steel plant in Orissa including

Iron Ore Mines in Khandadher

Steel plant in Jagatsinghpur Captive port near Paradip

1500 MW power plant near steel factory

12 billion $ investment in India 7% CAGR in domestic market
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Mineral map of Orissa

PASCO

Plant


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Highlight of project -2

4000 acres land to be accquired for project Capacity-12 mtpa-millions tonnes per annum

Location-Near Paradeep-Jagatsinghpur district

2010-1st phase to be completed, capacity -4 mpta 2013-2nd phase to be completed, capacity -4mpta

2016-3rd phase to be completed, capacity -4mpta

Raw material

600 million tonnes from Khandadher mines


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Benefits from project

Employment

Direct -13,000 Indirect-35,000 total 48,000

PASCO is required 18000 skilled workers within 8 years

State taxes-

89,000 crore- Excise, service tax, corporate tax

22500 crore sales and other various taxes of state Power plant for electricity

Captive port for EXIM trade


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Development of project

MOU signed by PASCO and OrissaGovernment in June 2005

Out of 4000 acres 1135 acres paymenthas been made by company but still couldnot acquired land

Licence for iron ore not yet obtained

Port project workjust started

1500MW Power plant on drawing board


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Economics Risk

India is fast growing emerging market inASIA

Inflation in between -4 to 6 %

GDP growth -9 %

Sufficient Foreign exchange reserve

INR is appreciate against USD Therefore minimum economic risk -C


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Political Risk

Sate Government is belong to Janata Dal

Central Govt is belong to UPA Govt

Clashes between two parties on project

Exam-Central Coal & Mines Minister MrRam Vilas Paswan is against state on toomuch facilities to be given to PASCO

CPI is opposing to this project on politicalground.

Therefore medium political riskB


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Legal Risk

Kudramukh Iron Ore company went incourt against state govt

KIOCL-Khandadher iron ore co also wentin court along with 250 applicants

The orissa High court stayed away to stategovernment for granting the mines lease

There is no provision in law to favourPASCO on 250 applicants


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Legal battle in Govt

The Ministry of Mines thinks that PASCOproposal falls under section 11(2) andsection 11(3) of the Mines & Material

(Development & Regulation Act 1957 As per Orissa Govt opinion,Section 11(5)

of the said act allows to grant a licence tolate applicant like PASCO

Matter is under Department of Legal affairs

This is a High Legal riskA


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Social & cultural risk

Over 20,000 people from 15 villages havebeen protesting saying it would take awaytheir homes and livelihoods

They are protesting by establishingPASCO Pratirodh Sangram Samiti

3 officers of PASCO were taken hostage

in these villages District administration is conducting

Socio-economic survey


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Opposition from local

We would not allow POSCO to set up itsplant here.

Company cannot take away peoples land

Abhya Sahu

President PASCO Pratirodh Sangram Samiti


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Social & Cultural Risk

50 people were injured in a series of clashesbetween opponents and supporter of projectsLand acquisition process stopped

PASCO cannot communicate with local peoplesdue to language barrier

Entry of Red Radicals

As per home ministry report Moist cadre hadalready entered into trouble area

This is high riskA
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Competitive Risk

Over 250 steel companies are in India including

Jindal steel-Essar Steel-SAIL-TATA steel-Bhushan Steel-Kudremukh Iron Ore-KIOCL

KOCL has spend INR 2 crore for assessing thereserve at Khandadhar mines

Kudramukh has also spend INR 2 crore LN Mittal is planning to set 20,000crore plant in Orissa

TATAs 2nd plant would be in existance by 2010 250 steel companies are opposing to PASCO

Therefore this is a high competitive riskA


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Competition from Indian Co


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Logistics Risk

The iron ore mines and steel plant -300km

Required dedicated freight corridor forcontinuous raw material flows from mines

to factory Wagons are not available in India

Paradip port has opposed to PASCO

private port for captive cargo 1500MW power plant is coal based plant

Therefore logistics risk isB


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Analysis

Economic Risk C

Political Risk B

Legal Risk A Social & Cultural Risk A

Competitive Risk A

Therefore this project is in high risk Investment in troubled waters


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Thank you

Crm - Pasco Case Study

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