Posco has proposed to build a $12 billion steel complex in mineral-rich Orissa, but the firm is facing problems over land and mining rights.

State-run Kudremukh Iron Ore Co. has staked a claim to the mines which Posco wants, although government officials say they are trying to resolve the issue. The firm, however, is yet to finalise an iron ore mining lease.

Posco''s proposed $12 billion steel project in Orissa, which could be India''s largest foreign direct investment, ran into trouble after local people protested against compulsorily acquisition of their land for the plant, which they say could displace up to 20,000 people.

Clashes between supporters and opponents have left scores injured, while villagers detained overnight two Indian executives of Posco in May.

The ministry of environment and forest cleared the project on July 19, following which it published a notification in a vernacular paper in Orissa, inviting comments and objection.

The 10-day period ended on 30 July and the company received no objections to the project. "As a result, Posco India is free to start work on the first phase of the project that involves a 4-million-tonne plant and 400mw captive power plant," a Posco spokesperson said.

According to the conditions laid down by the environment ministry, Posco has to spend the Rs1,525 crore earmarked for environmental pollution control measures judiciously as stipulated by the centre and the state.

In April, the ministry granted its approval under the coastal regulation zone to Posco''s proposal to set up a captive port at Jatadhari at a cost of Rs17,113 crore.

Observers say the clearance for the environmental impact assessment study is a milestone for Posco but the company has to negotiate some other serious issues before it actually starts construction. For instance, more than 3,000 acres of the 4,004-acre land it chose for the project is notified as forest area.

The forest land has to be denotified to set up the unit. To tackle the issue, it has worked out a forest diversion plan, which has been approved by the state and forwarded to the cntre for approval.

Officials said the company was likely to receive a clearance from the environment ministry for diversion of 3,200 acres of forestland shortly.

The Supreme Court, however, has the final say on whether the forest diversion clearance accorded by the committee is valid or not. The apex court will seek the opinion of a centrally empowered committee (CEC), a quasi-judicial body appointed by it, before it passes a final order.

However, the real worry is the displacement issue. Two years from signing the MoU with the state government Posco is yet to secure the land to build the plant as villagers of three panchayats have refused entry to government officials.