Tuesday, May 17, 2011

POSCO wins struggle for Orissa steel plant in India

POSCO wins struggle for Orissa steel plant
By Sudha Ramachandran

BANGALORE - Six years and several setbacks after it signed an initial memorandum of understanding with Pohang Iron and Steel Co (POSCO), the Indian government has given the South Korean steel giant its "final approval" for the setting up of a US$12.1 billion steel project in the eastern state of Orissa.

The environment ministry's go-ahead to POSCO's 12 million tonnes per annum steel project is expected to allay investor concern in India's business environment. Business corporations, especially those in the mining and metallurgy sector, have expressed their unease at green activism in the country delaying clearances for their projects and land acquisition not going fast enough.

The government's final approval" should reassure investors that

they can count on full support from the Indian government even if they violate the rights of Indian citizens, land laws and environmental norms.

However, problems have not ended for POSCO, Korea's biggest steel company. Tribal and environmental activists, who prevented the project from taking off for six years, have promised to continue their agitation against the Korean outfit and to pursue the matter in the courts.

The POSCO project includes a steel cum captive power plant with a captive port, and requires around 1,600 hectares of land of which 1,253 hectares is forest land. Although the government claims that land acquisition, which will begin on May 18, will be completed within a month, activists have pledged to disrupt these plans.

The Orissa government signed its memorandum of understanding with POSCO in 2005. The project came under fire from the start, with environmentalists pointing out that POSCO would exhaust iron ore reserves in the area within two decades even as the project would do incalculable damage to the environment. The steel mill and port were being constructed in ecologically fragile areas, where construction is forbidden under the law. Among other things, it would put at risk one of the largest feeding grounds of the endangered Olive Ridley turtles.

The project would also displace thousands of tribal people and destroy their agriculture and forest-based livelihoods.

POSCO promised to create 48,000 jobs, 7,000 of them in the project's first phase, but that did little to mollify locals, who put up stiff resistance to the project.

POSCO's proponents have often rued the "hard time" the steel giant was put through before it got the "final approval" early this month. They point to the bureaucratic delays in issuing clearances and the mass protests they had to endure over the years.

Indeed it has been a long wait. At several junctures over the last six years it did seem that POSCO would pull out of India. Last August, the environment ministry put the project on hold, but few multinational corporations have enjoyed the kind of support that POSCO has from the central and state governments.

The company's investment in the Orissa project is the biggest foreign direct investment (FDI) in the country. Delhi feared that a "no" to the project would sully India's image as an investment destination and also have a negative impact on growing India-South Korea economic relations. Most importantly, there was concern in Delhi over the fate of an India-South Korea agreement on civilian nuclear co-operation which has been finalized but not yet signed.

Given the present government's preoccupation with foreign investment and nuclear deals, it is not surprising that the POSCO project was being monitored by the Prime Minister's Office. The final clearance reportedly came following pressure from the Prime Minister's Office on the environment ministry.

The ministry did engage in some grandstanding over the past year, with Environment Minister Jairam Ramesh appointing committees to probe whether the project violated coastal regulations and forest and other environmental laws. In January, he issued POSCO a conditional clearance. Sixty "additional conditions" - 28 on the steel plant and 32 on the proposed private port - were grandly cited as evidence of the government's commitment to environment protection, even as it focused on economic growth.

Critics pointed out that there was no clarity on how the government would enforce the additional conditions, laying bare its flimsy commitment to environmental concerns and local needs. For instance, POSCO is required to "voluntarily sacrifice the intake of water" in the event of a shortage of water for irrigation. What if POSCO chooses not to comply? Would it shut down its project?

At the time of giving the conditional clearance, Ramesh said he wanted the Orissa government to give a "categorical assurance" that there are no traditional forest dwellers in the area, and that the Forest Rights Act is not being violated. As late as April, he chided the government for not taking seriously the resolutions passed by village councils. Yet within weeks, POSCO was given the final approval based on the "faith and trust" the environment minister reposed on the Orissa government's assurances.

Three committees constituted by the environment ministry found that provisions of the Forest Rights Act had not been adhered to in allowing land to be bought for the project. Village councils too passed resolutions against granting land to the project. None of these mattered to the government. In the end, in its desperation to send the international investor community the right signals, it subjected the environment ministry to intense pressure. It chose to subvert its own laws and to ignore the findings of investigation panels it put in place to please POSCO with a go-ahead.

The government has claimed that "projects such as that of POSCO have considerable economic, technological, and strategic significance for the country". Of course, the manner in which the government has bent over backwards to facilitate POSCO's investment could encourage other foreign investors to put their money in India's mining sector.

Murli Natarajan and Anu Mandavilli of the Mining Zone People's Solidarity Group point out that the project is "indeed hugely beneficial but only for POSCO and its investors".

"The captive iron ore mines promised to POSCO in the memorandum of understanding would help it recoup, in just the first eight years, the entire sum of $12 billion which POSCO claims it will invest over a period of 30 years. If ever there was a textbook case of the country's resources being given away, this is it."

Drawing attention to the enormous costs that the project will place on people living in the area, Natarajan and Mandavilli say that "about 22,000 people who currently support themselves by the area's thriving agricultural economy will be displaced and be rendered 'unskilled' and 'useless' by the new steel plant and port. An additional 20,000-25,000 people from approximately 30 neighboring gram panchayats [village governments] and in the Keonjhar mining area would suffer near total loss of their livelihoods."

To foreign investors and India's rich and powerful, the final clearance to POSCO signals what can be achieved with the support of a spineless government.

To others, the clearance given to POSCO despite its brazen violation of rules sets a dangerous and undemocratic precedent. It will enable the government "to use the excuse of strategic concerns to ride roughshod over the interests of people and the environment," observed the Economic & Political Weekly in an editorial. "It will also establish the acceptance of environmental clearances that are farcical and flexible, bending to political expediency rather than genuine scientific or environmental standards. And it will reinforce the growing belief that the rights of ordinary people matter little in the face of so-called larger 'national' interests that ultimately benefit the nation of the privileged."

Sudha Ramachandran is an independent journalist/researcher based in Bangalore.

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