Steel Minister Ram Vilas Paswan Thursday said a pact between South Korea's Posco and the government of Orissa would be signed by the end of this month for a $9 billion steel unit in the state.

"All issues with Posco have been sorted out. The memorandum of understanding will be signed by the end of this month," Paswan told reporters here.

He said one of the issues preventing the signing of the agreement was a demand for an additional 300 million tonnes of iron ore by the South Korean company.

"We had opposed this. The state government also held a similar view that it should not agree to the demand for an extra 300 million tonnes. Now Posco has agreed to drop the demand," Paswan added.

Speaking about other issues concerning his ministry, he said a new steel policy would soon be unveiled by the government, but categorically added that no public sector steel unit would be privatised.

"The question of disinvestment does not arise - even loss making companies will not be privatised," the minister said, addeding the government was considering a merger of mining companies with the state-run Steel Authority of India Ltd (SAIL).

He said the government may also merge the Indian Iron and Steel Company Limited with SAIL. ""I have sent a proposal to the cabinet for approval."

Paswan said all state-run steel units were in the black, but for Hindustan Steel Constructions Limited and Bharat Refractories Limited, for which major revival packages were being finalised.

He said his ministry proposed to increase the country's steel output to 65 million tonnes by 2012 and had accordingly asked all producers to hike their production capacities by 10 percent.

He said the government also proposed to invest Rs.250 billion ($5.6 billion) in SAIL over the next five years to increase its capacity.