"The environment clearance granted on January 31, 2011 to the project shall remain suspended till such review and appraisal is done by the ministry," a bench of tribunal comprising Justice CV Ramulu and Devendra Kumar Agarwal held.
The tribunal pointed out that memorandum of understanding between the Orissa 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.
It said the MoEF should take "policy decision" that in projects of such magnitude the EIA should be done for the complete project.
"The EIA should assess it for the full capacity right from the beginning," it said.
The tribunal directed the MoEF to review the clearance afresh and attach "specific conditions" which Posco would have to follow in a "defined timeline".
It also directed the MoEF to set up a special committee to "monitor the compliance to the environment clearance" thus granted.
The bench said appointment of Meena Gupta as chairman of the committee to review the environmental clearance showed "departmental bias" as she had only "supported" the environment clearance granted to Posco earlier during her tenure as the Secretary, the MoEF.
"The entire process was vitiated in the eyes of law," the bench said in this regard.
The tribunal also said that the project proponent should generate its own source of water instead of utilising the drinking water meant for the Cuttack city in Orissa.
"In the country drinking water is scarce. It would be better to ask the project proponent to generate its own source of water. Avoiding utilising water meant for Cuttack city could be asked by the ministry," it said.
The order came on a plea filed by environment activist Prafulla Samantray seeking quashing of the environmental clearance granted to Posco on the ground that it was "contrary to the provisions of the EIA Notification 2006" and was "illegal and arbitrary".
Advocate Ritwick Dutta, appearing for the petitioner, had said that impact on environment in case of steel production by the plant to its full capacity would be much more.
Prafulla, in his petition said, "It is admitted that the project will not be viable if it is restricted to the steel production of only 4 MTPA. In such circumstances, the EIA report should have been for 12 MTPA (of steel production). The project proponent has opted to do an EIA for 4 MTPA since the likely impact of 12 MTPA is bound to be much more and very significant".
Posco India Pvt Ltd was granted environmental clearance for its two projects, steel-cum-captive power plant project and captive minor port, in Jagatsinghpur district of Orissa in 2007.
The MoEF after reviewing the same, granted environmental clearance with additional conditions on January 31, 2011 which prompted the petitioner to move the tribunal.
The clearance was assailed contending that "the whole approach of the Expert Appraisal Committee (EAC) was not to give an unbiased opinion, but rather to justify the decision to grant environmental clearance to both the projects."
The environment ministry, however, had told the tribunal there was no infirmity in its decision to grant environmental clearance to Posco.
Posco had also maintained that it has not violated any law and is working in compliance with the norms.