crm - pasco case study
TRANSCRIPT
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Country Risk Management
PASCOs Investment in India
A case study
By Porf:S.B. Choughule
Project
http://images.google.co.in/imgres?imgurl=http://www.maps-india.com/india/india-map/india-tourist-map.gif&imgrefurl=http://www.maps-india.com/india/india-tourist-map.html&h=651&w=598&sz=42&tbnid=ZzC1fZcBHFRYGM:&tbnh=138&tbnw=127&prev=/images%3Fq%3Dindia%2Bmap%26um%3D1&start=2&sa=X&oi=images&ct=image&cd=2http://www.pasco.com/home.htmlhttp://en.wikipedia.org/wiki/Image:Near_by_han_river.jpg -
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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