Mumbai: South Korea''s POSCO, which is building a $12-billion steel complex in mineral-rich Orissa, is likely to start production by the end of 2011.

POSCO''s troubled project in eastern India is now making progress and the plant should begin production by the end of 2011, steel secretary R S Pandey said.

The project ran into trouble after locals protested against plans to compulsorily acquire their land, which they say, could displace up to 20,000 people.

"The POSCO project is now making some headway. The production should start by end of 2011," Pandey said.

The government gave environmental clearance for the plant this month and has also agreed to allow POSCO set up a captive port. However, the government returned the company''s application for an iron ore-mining lease as it was incomplete.

"We will begin construction work of our 12 million tonnes project in Orissa''s Jagatsinghpur district by October on whatever land we have acquired so far," reports quoted POSCO India chairman Soung Sik Cho as saying.

POSCO, meanwhile, is questioning the government''s mine leasing and licensing policies.

"In India everybody gets captive mines. If Tata and SAIL can have captive mines, why can''t we? Iron ore prices have shot up in the recent past and though it is not essential that one has captive mines to be competitive, it does help in some ways," said Cho. "The captive mines that have been promised to us by the Orissa government will contribute towards reduction of cost. Our project here will produce steel cheaper than in Korea."

Despite facing numerous hurdles, the company is confident there will not be any further delays as it seeks to start work on its first phase in the next two months. "I am not happy with the speed of the project and it has taken us longer than what we had anticipated in Korea. But at the same time I am happy that it is on track and we are getting all the support now," he said.

"The first phase of the 3-phase project has been delayed by six to 12 months and we will be able to finish it off only by 2011 as opposed to our earlier target of 2010. However, we do not expect any further delays and other phases will be completed relatively faster," Cho added.

Posco''s Rs52,000-crore project will use ''Finex'' technology instead of the widely prevalent blast furnace method. The technology, which has only been used in Posco''s steel plants in Korea, uses iron ore fines and non-coking coal as feedstock reducing operating costs. It also cuts down emissions, producing only 6 per cent sulphur oxide, 4 per cent nitrogen oxide and 21 per cent dust compared to a blast furnace.