ORISSA: I was talking on the phone this morning to Kamal Nath, India’s Minister for Commerce and Industry, about the $12bn integrated steelworks planned for Orissa by Posco of Korea. I am writing an article about Posco’s problems – the project is running at least 18 months behind schedule and construction will probably not start till early next year, so I wanted to hear Mr Nath’s view.
He made an important point: “This is one of the flagship foreign investment projects in the country but in India one has to weave one’s way through the procedures. That is not just a legal process or a financial process – it’s a social process.”
He added that “in a democracy all the stake-holders have to have a voice – and in India they have a particularly loud voice – so Posco has been through that learning curve”
Posco has indeed been on a steep learning curve since it signed an agreement in June 2005 for the project, as I discovered when I visited the company, and the site, in Orissa a few days ago.
It came to India looking for iron ore reserves and downstream customers to bolster its position as the world’s fourth largest steelmaker. It expected to move ahead quickly with the first ever integrated project undertaken on a greenfield site by any steel company outside its home country – and the biggest-ever foreign direct investment in India.
Instead, it has found itself mired in a mass of seemingly interminable delays – similar to those that have hit Lakshmi Mittal’s Arcelor Mittal projects in Orissa and Jharkhand. Posco is still waiting to get access to most of the steelworks site at Paradip – where staff have twice been briefly kidnapped and one protestor was killed during a violent demonstration at Dhinkia village – and to its proposed mining area .
Some progress was made last month when the Supreme Court authorized moves that will lead to it getting its land, but the delays continue.
It’s not just foreign companies that have been on that learning curve. Mukesh Ambani’s Reliance Industries (RIL) and others learned last year that they couldn’t steamroller SEZ projects through unwilling land owners. A Mumbai court has said there should be a referendum of 4,000 landowners on Reliance’s proposed site. The company is appealing against the order, but (updated Sept 21) villagers are being formally asked their views in a referendum-style survey. This is a good example of Mr Nath’s “social process” at work – the first trime it has happend in India
The Tata group is facing similar problems on its Nano car site in West Bengal and a steel project in Orissa. (It’s not turning out to be a very good year for Tata. It has also got environmentalists, led noisily by Greenpeace, opposing its plan for a port on the Orissa coast at Dhamra which is likely to disturb rare Olive Ridley turtles – a fact Tata is loath to accept). And it’s ironic that Mr Tata, who is chairman of the government’s Investment Commission that has been helping companies like Posco and Mittal, can’t ease Tata Motors’ plight.
It is easy to dismiss the Nano site row as a political battle between West Bengal’s ruling Left Front government and Mamata Banerjee’s Trinamool Congress, with Tata Motors cast as the unwitting victim. But that is too simple. There are questions about how much land Tata and its component suppliers actually need, which is not surprising given that many land developers in the past have often bought cheaply and then not used all their land for the designated purpose. That is what rightly arouses resentment among rural communities.
In many parts of the country there are empty sites where the poor should and could still be living. Tata Steel has one at Gopalpur in Orissa, where it hoped to start a steel plant on 3,000 acres in the 1990s but abandoned it in 2000 (partly because of local opposition) – it is lying idle awaiting Tata’s latest idea for an SEZ.
What is happening to Posco, Tata and Reliance now is actually good for the long term, even though it is causing the companies short-term problems and causing regrettable social disturbances and deplorable killings. The system for using agricultural land for industry has to be improved so that land owners and others who live and work in rural areas are not just swept aside.
As Mr Nath said, all stake-holders have to have a voice – and in India they have a particularly loud voice. Posco has learned that, and is now doing its best slowly and gradually to win local support.