Trouble and Posco are, by all appearances, conjoined twins. On Monday, a majority of members in a Union government-appointed panel to review environmental clearances for the project in Orissa recommended scrapping clearances given to the South Korean company for setting up a steel plant in the state.
If the clearances are revoked, something that cannot be ruled out now given the prevailing mood in the ministry of environment and forests, it will send out a negative economic signal about India. The Posco plant represents the single biggest greenfield foreign direct investment (FDI) project in the country. When completed, the plant would have an output of 12 million tonnes per annum. India has been dithering for one reason or another in giving clearances to the project. Now it may never take off.
Now matters have moved beyond the Posco plant. Globally, India will be viewed as an FDI-unfriendly country at a time when FDI inflows are already slowing. In 2010 (to date), India received 28% less FDI than the year before. There are no grounds for debating if India needs more investment. It clearly does if it has to industrialize.
The plant would have benefited Orissa’s economy and not a single company. This point eludes all the opponents of the project, including the three committee members who denounced it. Orissa is one of India’s poorest states. Its ability to spend money on development is severely hampered by its weak revenue base compared with other states. This, in turn, affects its future economic prospects. The Posco project alone would have given Rs2,600 crore every year in taxes, roughly 17% of the state government’s tax revenue in 2016-17.
One can endlessly debate whether this constitutes a “rosy” view of things. For the moment, ignore all this and assume that people affected by the project will be better off if the steel plant were not constructed. Assume that they continue to live in their pristine environment. But 10 years later, the gap between them and citizens living in India’s faster-growing states would have increased, not decreased. By that time there would be a chorus of voices saying that growth in India was fuelling inequalities. Influential voices would demand that government do something.
Now return to the present. These voices are heard even today. Inequality continues to be a “burning” topic among Leftist opponents of India being a free economy. It is another matter that the recipes they suggest, pro-people policies such as not letting governments set up industries, contribute to the inequalities they take such objection to. The Posco project is a victim of such blinkered economic thinking, if it can be called economics at all.
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