The Rs. 51,000 crore Posco steel project in Orissa is back in limbo, with the National Green Tribunal suspending the Environment Ministry’s nod to the country’s single largest FDI venture.

The government has now been told to conduct a fresh review by specialist experts to recommend new conditions, and ensure compliance before a clear deadline.

While the original environment clearances for the integrated steel plant and its captive port were granted in the summer of 2007, protests from green activists and local residents had led to a four-member review committee being set up by the government in 2010. The panel delivered a split report, with three members finding the clearances illegal, while chairperson Meena Gupta -- who had been environment secretary when the original Posco clearance was granted – merely recommended additional studies.

The government ignored most of the majority report, partially accepted Ms. Gupta’s minority report, and issued a January 2011 order upholding the clearances, with some added conditions.

It is that order that has now been suspended by the Tribunal, since the original clearances themselves cannot be contested at this late date.

“The final order dated 31.01.2011 made by the Ministry of Environment and Forests shall stand suspended till such fresh review, appraisal by the Environmental Appraisal Committees and final decision by MOEF is completed,” said the Tribunal.

Ironically, the Tribunal’s decision comes within a week of Prime Minister Manmohan Singh’s assurance in Seoul regarding the progress of the troubled project. "I recognize that sometimes our processes can be slow but there are effective mechanisms for resolution of problems and differences and a strong rule of law," he told a gathering of South Korean CEOs. "The government is keen to move forward with the POSCO project and there is some progress in this regard."

Speaking to reporters outside Parliament on Friday, Environment Minister Jayanthi Natarajan said strict and transparent procedures had been put in place before the clearance had been granted, adding that she needed time to study the additional measures prescribed by the Tribunal.

A Posco spokesperson said that the order would not result in any immediate delay to the project, since no production work has been started, and land acquisition activities would not be halted by the judgement.

The Tribunal slammed Ms. Gupta’s presence on the review committee as a conflict of interest. “Whether the act of Ms. Meena Gupta is fair or not, they are definitely hit by personal / official / departmental bias, in other words, she supported the decision made by her earlier. This is in gross violation of principles of natural justice,” it said. “Therefore, the entire process of review is vitiated under the law.”

The judgement also criticised the government’s decision to grant its clearance while assessing the environmental impact of only a third of the project. While the project’s steel production capacity will be 12 million tonnes per annum (MTPA), the environmental impact assessment (EIA) report only considered the first phase capacity of 4 MTPA.

The Tribunal has told the government to take a policy decision that in similar cases in the future, an EIA must consider the full capacity of the project, rather than granting piecemeal clearances for separate components.

It also directed that the Environment Ministry consider a policy to insist that all water-intensive projects find their own sources, rather than diverting water meant for irrigation or drinking. In Posco’s case, it said an alternative source could be examined, rather than using water meant for the city of Cuttack.