Posted by: John Elliott | September 17, 2008

Posco on a learning curve about India’s “social process”

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.”

The Posco site at Paradip in Orissa

The Posco site at Paradip in Orissa

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 .

Villagers block entry to Dhinkia village on the Posco site

Villagers block entry to Dhinkia village on the Posco site

 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.

the Posco site alongside Dhinkia village

the Posco site alongside Dhinkia village

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.


Responses

  1. […] Posco on a learning curve about India’s “social process” Sept 17, 2008 […]

  2. I have got some government figures that say that in 1983 the percentage share of people engaged in agriculture and allied activities to all workers was 68.45% but in 2004-05 it fell with a thud, to 56.67%. In West Bengal, where Tata’s Nano factory would have been located, just about 52% of total workers do agriculture (or logging/fishing). For livelihood in India, the global trend away from agriculture has just started. In Britain, for example, 31% workers were in the farming sector in 1801 and it took 90 years to drop to 11% (I remember having read it on one of Eric Hobsbawm’s books).

    In places in the country where edible crops are grown, every farmer is a subsistence farmer who most probably teaches in some school or works in a government office. Similarly the tenant farmer is a part-time tailor or boatman. They have links with land that are becoming weaker, due to forces of history, perhaps.

    Politicians are playing on the memory of those who’d once lived off land. In most cases, politicians have other interests. In West Bengal, where the political underpinning to the development is transparent, the battle for land is a cover for an opposition which has smelt blood with growing signs of weakness of a party sitting in power in that state for 31 years–not by the fairset of means, as many people think. For the Tatas, the choice of the project site was certainly not a sound business decision.

  3. Haryana has been managing the agricultural land issue pretty well for the last many years. Perhaps, it has something to do with the fact that all politicians have benefited rotationally from the acquisitions almost equally!

    If fair and attractive norms can be laid down which assure recurring returns and jobs to farmers whose lands are being acquired, the problems will ease out. But that will add to the cost of projects, which perhaps some industrialists are not willing to accept. Hence the bulldozing with the help of state governments, leading to social and political tensions


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