By Nageshwar Patnaik in Bhubaneswar, June 21, 2015 :

It was once billed as the India’s biggest Foreign Direct Investment [FDI] project that would catapult Odisha into the big league and as one of the most favoured business destinations globally. But ten years down the line since the inking of a MoU with the Odisha government with much hype, the dreams of setting up a mega steel plant near Paradip in Jagatsinghpur district have turned sour for Posco.

The South Korean steel major had plans to mine iron ores, build a steel plant and set up a captive port for an estimated cost of Rs 52,000 crore, which at the current cost has shot off to more than Rs 65,000 crore. The project represented the single largest injection of foreign direct investment (FDI) in the country and would have enriched the stage coffer close to Rs.750 crore in tax revenue every year for 30 years.

Bogged by delays in land acquisitions, mining rights and environmental clearances, the steel major had scaled down their Odisha plans to eight million tons per annum [mtpa] in capacity after the land promised for the project was reduced to half. Even 8 mtpa is a dream now. In fact, there are very clear doubts if the project will take off at all – say people connected with the business groups and senior state government officials.

What has complicated most of the mega projects is the stand of union ministry of forests and environment and union ministry of mines. The focus on the environment sharpened after
National Green Tribunal [NGT] ordered a suspension on the environment clearance that was given to POSCO Steels three years ago.

The NGT’s directive came at a time when the Odisha government had initiated process of land acquisition for the country’s biggest FDI project, for which 4,004 acres are required. The state government had handed over 2700 acres of land to kick start the first phase of the project i.e 4 mtpa.
The mineral rich areas are home to the poorest of the poor – mostly Adivasis and Dalits.

The state had tried to crush movements opposing to hand over their land, water and forests to corporate. The peasants, workers and Adivasis of Odisha have refused to buckle under state pressure and have put up stiff resistance to the forcible eviction all over the state.

For Posco project, during 2005-09 the state government had fixed the price of those lands at below one lakh rupees per acre which was quite absurd. However, under public pressure, the state government went on increasing the price of the private land to Rs 18 lakh per acre, government land @ Rs 11.5 lakh and homestead land @ Rs 40 lakhs per acre.

“Even at this rate, if the people agree to take the compensation they will get around Rs 160 crore for the 1000 acres of land which is approximately 0.3 percent of the total project cost. Even if Government will agree to pay Rs one crore per acre the total compensation to the villagers will come to around Rs 1000 crore which is just about 2 percent of the project cost. This will be the onetime payment to the people who will lose all their assets and source of livelihood for generations”, former member, National Farmer’s Commission, Jagadish Pradhan says.

Land ownership in proposed Posco project near Paradeep is not measured in acres but in decimals—one acre is equal to 100 decimals.

“Most people own 10-30 decimals of land, or roughly 1/10 of an acre. A household having 1/10 of an acres or 4000 square feet earns Rs one lakh a year that includes the cost of family labour. The family also uses their time for taking up other crops, goatery, fishery etc. which would give additional income of Rs. 50,000- to Rs. 100000- per annum. If the family has 2-3 more vine yards using the same family labour (managerial work) they can earn additional 2-3 lakh rupees. Besides one vine yard with an initial investment of about Rs. 50,000- creates employment of 541 person days apart from keeping the vine owner’s family fully employed”, Mr Pradhan says.

Significantly, this earning is good enough for them to oppose the acquisition of their land. The reason is that this money comes on a monthly basis, and year after year. The earning of Rs 3,000-Rs 4,000 per month per family takes people marginally above the wretchedly low poverty line.

This perhaps explains a strong anti-Posco agitation and unless a miracle occurs, a plant of that scale and size will not be seen in Jagatsinghpur.

But Posco project just could not take off as beside land, it had problems in acquiring mining rights.
More significantly, the failure in grounding of Posco project can be attributed to the valuation of natural resources, particularly the iron ore – the bulk input to make steel. With the change of guard at the centre, the entire gamut of mining policies took a twist with the Narendra Modi government deciding to put the mineral resources on auction mode.

The Khandhadhar iron ore mine reserve, which was earmarked for Posco by the Naveen Patnaik government, will be put for auction and that is a clear signal that the South Korean company has to bid. This is what precisely, Posco did not want. From the day one, Posco had made it clear that since it did not have direct access to iron ore mines anywhere in the world, Odisha steel plant proposal, which entailed a captive mine, attracted to the state for the largest FDI investment.

The Posco tangle also has exposed the high-level of mistrust between state governments and the centre. The Naveen Patnaik government had been constantly claiming that the centre has all the time been acting against the state’s interests. There may be some truth in the claim as the state government’s efforts to bring large industrial projects have been stymied by the centre thanks to the archaic Environment Protection Act, 1986 and mining policies. Posco episode only reinforces this.