South Korea's Pohang Steel Company (Posco) is set to sign an agreement for a plant in Orissa after the company Friday agreed to a condition set by the state government on the use of iron ore.

"Posco has dropped the idea of exporting iron ore from Orissa and would use its captive mines to meet the requirement of its plant," the company's director Tae Hyun Jeong told reporters after a meeting with Chief Minister Naveen Patnaik here.

The state government had put this as a condition for signing the agreement.

Top Posco officials, headed by its president Chang Oh Kang, had inspected the plant site at Paradip in February.

Soon after, the government had announced it would sign an agreement with the company, but this was put off as both sides failed to agree on the issue of iron ore exports.

Posco, which proposes to set up a 12-million tonne capacity steel plant, had asked the state government for mining rights on iron ore worth $600 million for 30 years for captive use.

Besides, it also wanted permission for exporting iron ore worth $400 million through its partner in the project, BHP Billiton of Australia.

The state government rejected this proposal, saying its policies did not allow export of iron ore. It suggested captive use of iron ore for value-addition purposes within the state.

An official in the state's steel and mines department told IANS that with Posco agreeing not to export iron ore, the possibility of signing the agreement was bright.

State and Posco officials will meet next week, he said.

According to Jeong, BHP Billiton of Australia would not be a partner in the project.

--Indo-Asian News Service