State law department objects to MoU renewal with Posco

State law department objects to MoU renewal with Posco
BS Reporter / Kolkata/ Bhubaneswar Mar 30, 2012,

The Orissa law department has objected to the proposal to extend or
renew the memorandum of understanding (MoU) signed with the Korean
steel maker Posco, saying that it will be illegal to extend the
validity of an expired MoU.

The five-year term of the MoU signed between the Orissa government and
Posco in June 2005 for setting up of a 12 million steel plant at
Paradip, had lapsed in 2010. The two parties had been in negotiation
since for renewal of the MoU with some changes in original terms and
conditions.

The MoU hurdle has further queered the pitch for the steel giant which
was facing problems in getting the project off the ground due to
agitation by the locals to land acquisition and delays in getting
statutory forest and environment clearances.

"In the instant case it appears that 5 years have already expired. So,
after expiry of the period of validity, extension of the same may not
be possible. Extension is made prospectively before the expiry of the
original MoU," the law department said.

In the absence of a valid MoU, the state government was often
criticised by the opposition political parties for going ahead with
land acquisition and other facilitating work for the project.

The law department, although did not see any legal problem in going
ahead with land buying without a proper MoU, suggested that the state
government must sign a tripartite agreement with Posco India and its
parent company based in South Korea. It also offered a way out to
validate all the project related work done after the expiry of the
MoU.

The law department's comments were discussed threadbare in a high
level meeting of senior bureaucrats chaired by chief secretary BK
Patnaik this week. Apart from the law secretary, senior officials and
secretaries of steel and mines and industries department took part in
it.

The meeting decided, "An instrument (a legal agreement or deed) may be
signed allowing further time for establishment of the project after
obtaining orders of the government. The instrument will contain a
clause providing that the actions done pursuant to the provisions of
the original MoU after expiry of the validity period will be treated
to have been done as per the instrument,"

"The instrument may contain the details of revised clauses or new
additions with a provision that the clauses not specifically revised,
will remain as such as provided in the original MoU," the group of
officials recommended.

It may be noted two weeks before the expiry of the MoU, Posco India
had applied for its renewal on June 8, 2010. However, the state
government had wanted some changes in the terms and conditions of the
original MoU, particularly in reference to raw material swapping
clause and addition of new clause on prioritizing jobs for locals. The
difference between the two sides on these issues had delayed the
renewal process.

The state government, after dragging its feet over MoU renewal for
more than a year, has shown interest to make progress in the
formalities, ostensibly after the Prime Minister Monmohan Singh
assured the South Korea President about speedy expedition of
clearances for the project last week.
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