Odisha state wants New Delhi to grant an iron ore exploration licence to South Korea's POSCO for its proposed $12 billion steel plant in the state, seeking an exception to a rule mandating auctions for all new mines.
Prime Minister Narendra Modi's government last Monday issued an executive order under which states will have to auction off mines to "remove discretion in grant of mineral concessions".
But Modi's desire to cut corruption in the mining industry has created a fresh hurdle for POSCO, which had been expecting the Centre to hand it over a licence without any competition.
Odisha has already sent letters to the federal government recommending a licence for POSCO for what would be the biggest foreign direct investment in India. The Centre, however, has yet to make a decision on Odisha's request.
"POSCO should be given a mining lease on the recommendation of the state government," Prafulla Kumar Mallik, Odisha's mines minister, told reporters on Monday after a meeting of mines ministers in the capital.
The Union mines and steel minister, Narendra Singh Tomar, said he would not comment on any company.
POSCO's New Delhi-based spokesman IG Lee said the company was still studying the executive order and would not comment beyond that.
The company has yet to start work on the planned 12 million tonnes-a-year plant due to stiff opposition to land acquisition and delays in securing permission to mine iron ore, a key raw material for steel.