New Delhi, Mar 31 (IANS): The National Green Tribunal (NGT) Friday suspended environment clearance to South Korean steel major Posco's $12 billion project in Odisha, the biggest foreign direct investment in the country.

Hearing the petition of Prafulla Samantray from the state, the bench of Justice C.V. Ramulu and Devendra Kumar Agarwal asked the environment ministry to review afresh the environment clearance accorded to the project in January last year.

"The environment clearance granted on Jan 31, 2011 to the project shall remain suspended till such review and appraisal is done by the ministry," the order stated.

The order comes days after Prime Minister Manmohan Singh's assurance to South Korea that the government was taking "proactive" steps to improve the business climate and move forward with the Posco mega steel plant project in the state.

Reacting to the order, Environment Minister Jayanthi Natarajan said: "We are dedicated to protecting the environment and if something has been pointed by the NGT, certainly we will take a look at it."

According to tribunal, the memorandum of understanding between the state government and Posco states that the project is for production of 12 million tonnes of steel per annum (MTPA) but the environment impact assessment (EIA) report has been prepared only for 4 MTPA steel production in the first phase.

"A close scrutiny of the entire scheme reveals that a project of this magnitude, particularly in partnership with a foreign country, has been dealt with casually without there being any comprehensive scientific data regarding the possible environmental impacts," the tribunal observed.

The tribunal further said that no meticulous scientific study was made on each and every aspect of the matter, leaving lingering and threatening environmental and ecological doubts unanswered.

Asking the ministry to attach specific conditions which the company would have to follow in a defined timeline, it also directed for setting up a special committee to monitor compliance to the environment clearance.

The bench also directed that Posco should generate its own source of water instead of utilising the drinking water meant for Cuttack city. It also talks of managing plant's discharge and impact on surrounding wetlands and mangroves, as well as cyclone risk.

POSCO and the government sought to argue that the case cannot be filed as the original clearances were given in 2007.

However, the tribunal held that the 2011 order can still be looked at even if the 2007 ones cannot be, and therefore directed review and suspension of the 2011 order.

The petitioner welcomed the tribunal order saying people in the area have been demanding scrapping of the project for long.

"I am very happy with the court ruling as we have been demanding scrapping of the project since the start. The company has violated all norms," Samantray told IANS.

Posco requires 4,004 acres, mostly government land, for its project. Of the land earmarked, 2,900 acres is forest land.

Thousands of villagers have been opposing the project, saying it will displace them from their homelands and ruin their betel leaf farms.

Posco and the state government, however, maintain the project will bring prosperity and employment to the impoverished region.