POSCO expects its proposed $12 billion steel mill project in the state of Orissa

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not to be delayed by ongoing talks between the central and state governments of India, a spokesman at POSCO said on Monday.

Last Friday, the environment minister said the state had been directed to stop all work on the project, including land acquisition, as a special committee had found it violated the forest rights act that seeks to protect forest land and settlers. The chief minister of the state of Orissa then appealed to the prime minister to allow South Korea's POSCO to continue work on the project.

"While it is an issue between the Indian state and central governments, POSCO believes it will be settled well soon. We don't see this will delay our plan to build the mill there," Choi Doo-jin, spokesman at POSCO, said.

POSCO, the world's third-largest steelmaker, wants to mine iron ore in the Khandadharnear region of Orissa and signed a memorandum of understanding in June 2005 for the plant, which was to be built in three phases by 2016, with production scheduled to begin by the end of 2011 at the completion of the first phase.

Choi said the production had been delayed as the start-up of the construction, initially set in 2008, was halted. The current delay, however, was within the company's expectations under its revised schedules, which he declined to disclose.

Shares of POSCO lost 1.36 percent to 509,000 won as of 0148 GMT, underperforming the broader market.