POSCO’s envisioned $12 billion steel mill project in India hit another snag as the country’s environmental panel suspended the approval given to the construction plan that has dragged on for seven years.

The ruling by India’s National Green Tribunal, after considering a public petition, said the Environment Ministry should reassess the conditions on which environmental clearance was granted to the project last year, Environment Minister Jayanthi Natarajan said Friday in New Delhi. Natarajan said her ministry will study the details of the verdict.

POSCO said the final approval from the Indian environment ministry was still valid, and that it was waiting for the ministry’s decision on the latest order by the tribunal.

“The final clearance given to the project in January 2011 is still valid,” a POSCO spokesperson said.

“We are currently in the process of purchasing the land for the complex. We do not know when the construction can begin, and we are waiting for the ministry’s review of the tribunal’s ruling.”

The tribunal said the clearance granted last year was based only on environmental information from the first phase of the project and not the entire project.

POSCO’s plan to build the $12 billion steel mill in the eastern province of Orissa was known as the biggest foreign direct investment in India when it was first announced in 2005.

The world’s third largest steelmaker signed a memorandum of understanding with the provincial government of Orissa in June 2005 to build the steel mill with an annual production capacity of 12 million tons on the condition that the company is given the right to mine 600 million tons of iron ore there for 30 years.

The project has since languished as local farmers refused to move out of the government-owned land they have occupied for generations.

Plans to clear more than 1,600 hectares of mostly forested land for the plant aroused regulatory delays and public protests.

In October 2010, three of four members of a government panel suggested that initial permits given to POSCO in 2007 be canceled because of flaws in studies to determine the project’s effect on the habitat. A separate report by the head of the panel asked for conditions to be added to the existing clearances.

Friday’s order by the environmental tribunal for a fresh review of the project contradicts the position of Indian Prime Minister Manmohan Singh.

Singh told a group of Korean businessmen during a visit to Seoul last month that his government “is keen to move forward with the POSCO project,” and urged the Korean industry to “have faith in India.”

By Kim So-hyun and news reports (sophie@heraldcorp.com)