Orissa Wednesday evening signed a deal with South Korea's Posco, the world's fifth largest steel maker, in India's largest foreign direct investment for a 12-million tonne steel plant in the state.

In a specially organised ceremony at the state secretariat, Posco's executive vice president Soung Sik Cho and principal secretary of the state steel and mines department Bhaskar Charterjee signed the memorandum of understanding (MoU).

The MoU was signed in the presence of Chief Minister Naveen Patnaik, top officials of the state and Posco.

Posco will build a steel complex involving a 12 million tonne steel plant costing $9 billion, a 30 million tonne iron ore mine, a mill for hot-rolled coils near the port town of Paradeep in the coastal district of Jagatsinghpur and a seaport along the state's coast, an official of the state steel and mines department told.

The steel project will be completed in two phases. Each phase will consist of two modules of three million tonnes per annum.

The first module is expected to be completed by June, 2010. Thereafter, three million tonnes of capacity will be added every two years, the official said.

The plant will reach its full capacity of 12 million tonnes by 2016, according to a release by the state government.

The central government is likely to benefit by about Rs.890 billion over a period of 30 years by way of excise and customs duties, service taxes and corporate income tax, the release said.

The Orissa government, on the other hand, is likely to benefit by about Rs. 225 billion over a period of 30 years by way of other taxes, it said.

The entire project including the mining, steel plant and port is likely to generate direct employment to 13,000 people and indirect employment to 35,000, the official said.

During the construction stage, it is estimated that Posco will need more than 18,000 skilled workers (such as carpenters, welders, brick layers, painters and electricians) daily, he said.

Posco will register a company in India that will set up the integrated steel plant and apply for the mining leases as well as carry out all related operations. The registered office of this Indian company will be in Bhubaneswar.

The state government has also granted Posco mining lease rights for 30 years to supply a total of 600 million tonnes of iron ore to the new plant.

The government has allowed the steel major to swap 30 percent of the iron ore allotted to it, he said. The steel major has reduced its iron ore linkage demand from one billion tonnes and also agreed to a "no net export of ore" despite earlier insisting on exporting a small portion of high-grade ore to Brazil.

Security was beefed up around the state secretariat ahead of signing the MoU in view of the announcement of four opposition parties to oppose the deal.

The deal came in for a flak from the opposition, including the Left parties, the Janata Dal-S and the Orissa Gana Parisad (OGP). Even a section of the Bharatiya Janata Party openly expressed its opposition to the way the deal was made.

Hundreds of activists of the Communist Party of India-Marxist (CPI-M) Wednesday were arrested while protesting the government grant to let the company swap 30 percent of iron ore.

Hundreds of students of the Akhila Bharatiya Vidyarthi Parisad (ABVP), a student organisation linked to Bharatiya Janata Party - the coalition partner of the Biju Janata Dal headed by Naveen Patnaik - also demonstrated before the governor's house.