* Supreme Court clears Posco to use forest land
* Court also allows Vedanta to mine on sacred hills
* Local tribes, farmers threaten more protests
By Bappa Majumdar
NEW DELHI, Aug 8 (Reuters) - Hurdles blocking two major projects, including India's biggest foreign investment, were cleared by the Supreme Court on Friday despite protests from farmers and an ancient tribe angry over losing their land.
South Korean steel firm POSCO (005490.KS: Quote, Profile, Research, Stock Buzz) was allowed the use of large swathes of forest land to build a $12 billion plant, while Britain's Vedanta Resources Plc (VED.L: Quote, Profile, Research, Stock Buzz) was permitted to mine bauxite in hills held sacred by an ancient tribe.
The stand-offs over the projects in eastern Orissa state reflect a larger anger among Indian farmers and tribes fighting to save their land from factories as the country's economic priorities shift from agriculture to industry.
The court's decisions also highlighted worries from environmental groups that the projects threaten ecological balances and fragile biodiversity in a mineral-rich state.
"The project will bring significant employment and economic livelihood for the local people and overall development for the region," C.V. Krishnan, a senior Vedanta official, told Reuters.
But farmers and tribesmen are up in arms against the plants.
"Even if you kill us we will not give up Niyamgiri (hills). Our souls are in Niyamgiri, our food, water, homes are in Niyamgiri," Jairam, an activist of the Dongria Kondh tribe, told Reuters outside the court after hearing the Vedanta ruling.
Vedanta wants to dig open-cast mines in the Niyamgiri hills to feed the refinery it has already built there. But the Dongria Kondh tribe says the mines will destroy hills they consider sacred, force them from their homes and destroy their forest-dependent livelihoods.
"Today's ruling is a devastating blow not just to the Dongria Kondh, but to all of India's tribal peoples," Survival International's director Stephen Corry said in a statement.
Environmentalists say the open-cast mine would also wreck the rich biodiversity of the remote hills and disrupt key water sources that supply springs and streams in the area and feed two rivers that irrigate large areas of farmland.
Angry protests by farmers have also held up POSCO's factory for nearly two years, as villagers erected barricades in the form of huge gates at several entry points to stop government and company officials from visiting the site.
POSCO so far had been able to get about a quarter of the required 4,000 acres (1,600 hectares) of land. The court has now allowed the firm use of another 3,000 acres of forest land.
"We are hopeful we can now expedite the whole work of land acquisition," Avinash Tiwari, a POSCO official, said.
Protestors claim the plant could displace 20,000 people, while the firm and government say it will create jobs in an impoverished part of the country.
Vedanta also promised the court it would spend 5 percent of the profits from the bauxite mine, as well as from an adjacent aluminium refinery, on rehabilitation and the environment.
But opposition to the two projects may not die out yet.
"We will continue our protest. We will not give up our land," Prasant Paikray, an anti-POSCO leader, told Reuters. (Additional reporting by Jatindra Dash in Orissa and Biman Mukherji and Nigam Prusty in New Delhi; Writing by Krittivas Mukherjee; Editing by Alistair Scrutton and Paul Tait)