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Orissa’s industrial dream mired in delays, protests

Most projects stalled over issues of land acquisition, corruption and environmental violations
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First Published: Mon, Oct 29 2012. 09 29 AM IST
Private security guards walks at the Posco India project site office in Jagatsingpur district in Orissa. Orissa has been plagued for decades by Maoist groups that use violence to destroy infrastructure and disrupt industry. Photo: Reuters
Private security guards walks at the Posco India project site office in Jagatsingpur district in Orissa. Orissa has been plagued for decades by Maoist groups that use violence to destroy infrastructure and disrupt industry. Photo: Reuters
Angul: A few hundred metres from the high walls and barbed wire guarding billionaire Naveen Jindal’s upcoming steel plant, a dozen men have gathered at a tea stall. Their plan for this and every day: disrupt any attempt by Jindal’s company to lay a water pipeline.
The men, from villages near Angul in Orissa, have twice scuttled efforts to lay the pipeline in protest against Jindal Steel and Power Ltd’s unwillingness to increase compensation and offer permanent jobs for taking over their land.
“The company doesn’t come clean on exact terms. Revenue officials say: let work get done, we will resolve this later,” says Sukanta Kumar Pradhan, the sarpanch, or headman, of Kankarai village. “What else can we do?”
Jindal’s biggest project, which will eventually comprise a 12 million tonne per annum steel plant and a 2,400 megawatt power plant, is hampered by a barrage of protests by displaced locals, stalled mining approvals and delays in environmental clearances.
The project, estimated to cost $10 billion, is one of several that are similarly held up in the state. Tata Steel Ltd, India’s largest private steel-maker, has scaled back plans announced in 2004 to build a $6.3 billion plant. The downsized project is slated to be completed in 2014.
A $12 billion steel plant to be built by South Korea’s Posco, agreed in 2005, has been stalled for years.
Orissa lies in the heart of India’s mining belt and holds one-third of the country’s iron ore reserves, a quarter of its coal, half its bauxite and more than 90% of its nickel and chromite. The state accounted for about one-fifth of all industrial investment proposals in India in the last four years.
Since January 2008, Orissa has attracted investment proposals worth $210 billion. Besides Tata, Jindal and Posco, investors include global heavyweights such as ArcelorMittal and Vedanta Resources Plc.
In addition to the mineral wealth, Orissa lies on India’s east coast and provides easier access to the sea than other mineral-rich areas in the interior.
But Orissa is also one of India’s poorest states, plagued for decades by Maoist groups that use violence to destroy infrastructure and disrupt industry.
Most industrial projects have been stalled over land acquisition issues, accusations of corruption, environmental violations and a popular backlash against industry. Some have been dramatically scaled back.
“It’s broadly a reaction to the kind of business practices that have been done in these areas previously,” Jahangir Aziz, senior Asia Economist at JP Morgan, said of the backlash that has resulted in delays.
“It is focused on land acquisition and environmental violations, but the underlying reason is that there has been unfettered mining that has impacted livelihoods. That is why people are far more cautious.”
Mineral-rich, poverty-stricken
Since it first made a push to attract industry in the late 1990s, the number of people in Orissa living in poverty, defined as earning less than $13 a month, has fallen to around 40% of its 42 million people from close to 50%. Overall, India’s 1.2 billion people had a poverty level of 30% in 2010 and Orissa counts among the poorest of its 28 states.
Industrial projects were expected to generate employment, but not enough locals can do the work, meaning large groups such as Jindal and Tata must source more than one-third of their skilled labour elsewhere.
“The prime attraction of industry for people is employment, but that is not materializing,” said Biswajit Mohanty, an environmental activist.
Orissa will be short of 4 million skilled workers by 2026, an Ernst and Young study predicts.
Many residents also complain they don’t get adequate compensation for their land, that water is diverted from farming to industrial projects, and that, in general, there is a big gap between what is promised to displaced persons and what is delivered.
“There is no connect with people’s needs,” Mohanty said.
By comparison, more developed states such as Maharashtra or Gujarat have been able to advance industrialization with popular support, he said.
Political will
Critics have long argued Orissa’s pro-industry policies are biased towards large companies, and its eagerness to sign agreements opens it to corruption. That can in part explain a project-implementation ratio of only 39%, compared with a national average of 45%, estimated by ProjectsToday, a local industry magazine.
“They are simply looking to garner cheap minerals for their long-term benefits,” said Mohanty, who has dragged several companies, including Vedanta Aluminium, Jindal and Essar Steel to courts or regulators over alleged violations.
Opposition politicians and environmental activists in the state blame chief minister Naveen Patnaik, who has been in office for nearly 13 years and is widely described as autocratic, for mishandling the push to industrialize. Patnaik, who leads the regional Biju Janata Dal party, did not reply to interview requests.
Sahadev Sahoo, a former chief secretary, the top bureaucrat in the state, said the local government does not have the resources to communicate the benefits of industrial projects to local people.
“The land issue should be handled by political parties through their ground-level workers, not by bureaucrats,” he said.
Game of perseverance
Outside Jindal’s Angul plant, villagers have again used peaceful protests to block the pipeline, a course of action they will continue until demands are met, the headman, Pradhan, said.
Jindal in turn, says it has settled displacement issues on most of the area for its scaled-down 6 million tonne steel plant and 900MW power plant and has paid an additional amount to villagers.
“The delay in (the) project is due to several other reasons whereby land sellers, even after receiving their compensation, demand more price retrospectively,” the company said in an e-mail. It has previously blamed “vested interests” for blocking the water line, media reports said.
About 130km (90 miles) away, Tata Steel’s Kalinganagar plant is under construction after years of delay.
After eight years and huge cost overruns, it is still struggling to displace settlers and has no mining approvals. Faced with surging demand, Tata started work on a 3 million tonne unit—half the originally planned size—which it hopes to complete by 2014.
Orissa has asked others, including Posco, whose long-stalled steel plant has come to symbolize the frustrations of foreign industrial investors in India, to scale back plans in order to get projects back on track.
“We are looking at how project sizes can be reduced, existing acquired land be used, or any other solution found,” said Rajanikant Singh, Orissa steel and mines minister.
While the problems are particularly acute in Orissa, neighbouring mineral-rich areas are similarly affected.
In Chattisgarh state, second only to Orissa in garnering investment proposals, dreams of turning into a power-hub are gradually evaporating, with only a fraction of the planned 60 power projects likely to be operational soon.
It has turned to non-mining industries and recently held roadshows to attract investment in sectors such as information technology, automobiles, pharmaceuticals and food processing.
Scores of projects in neighbouring Madhya Pradesh and Jharkhand are also languishing due to delays in land acquisition or mining clearances.
“It’s a game of patience and perseverance,” said Sajjan Jindal, chairman of JSW Steel Ltd, whose project in neighbouring West Bengal has been stalled over mining approvals. “The large projects will definitely come. When, I can’t say.”
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First Published: Mon, Oct 29 2012. 09 29 AM IST