POSCO’s troubled $12 billion steel mill project in India appears to have hit a snag as the steelmaker and an Indian local government are in dispute over payment for its construction site.

According to Indian news reports, a high-ranking government official said POSCO had shown unclear intentions about the project that has remained idle for 10 years.

“POSCO must clarify its intention whether it wants to set up the plant or not,” Indian Steel and Mines Minister Prafull Kumar Mallick was quoted as saying by the Indian media on Sunday.

POSCO said it has not received any official communication from the state government on the matter.

The bone of contention is the payment issue between a state-run land company and POSCO.

The state-run Odisha Industrial Infrastructure Development Corp. has been demanding 730 million rupees ($11.4 million) from POSCO for a 1,700-acre plot of land. The Odisha government is demanding payment for what is only part of the 2,700 acres allotted for the steel mill.

With a significant chunk of the site still out of reach, POSCO is maintaining that the due payment will be made once the entire plot is made available. POSCO said the remaining 1,000 acres of land are currently unavailable as people are still residing there.

Local reports accused POSCO of losing interest in the 10-year-old project following a regulation change earlier this year.

In January, POSCO lost its iron ore mining rights after the Indian government issued an ordinance that requires all mining licenses to be issued via auctions. POSCO’s original agreement with the Odisha government in 2005 states that the steelmaker would build a steel plant with a 12 million-ton yearly production capacity in return for a mining license for 600 million tons of iron ore.

Despite the continued backlash from residents and slow progress, POSCO maintains that it is fully committed to the project.

“For us, India has a very high marketability,” a POSCO spokesman said Monday. “We do not want to be seen as pulling out from the project, and we don’t have any intention to do so.” 

By Suk Gee-hyun (monicasuk@heraldcorp.com)