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Business News/ Opinion / Online-views/  Posco: tough call for the new government
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Posco: tough call for the new government

How the next government may have to deal with Posco's massive integrated iron and steel project in Odisha

Where UPA’s return to power will boost chances for the project, things may get more complicated if BJP-led National Democratic Alliance takes office in New Delhi. Photo: AFPPremium
Where UPA’s return to power will boost chances for the project, things may get more complicated if BJP-led National Democratic Alliance takes office in New Delhi. Photo: AFP

Some kimchi for your thoughts, as it were, about how the next government may have to deal with Posco’s massive integrated iron and steel project in Odisha.

To smoothen the way for the controversial project, the company offers what it terms “happiness management". As articulated in a message to the office of the United Nations’ High Commissioner for Human Rights, which is probing allegations of human rights violations over the showcase project—at a proposed investment of $12 billion, potentially the biggest feather in India’s foreign investment cap—Posco’s vision is: “Happy Together for a Better World."

The three “core values" for this proposition are: “Better Tomorrow: business management for a better and happier world"; “Fair Interests: business management for public and social contribution"; and “Mutual Success: business management for shared growth and development."

Such values seem a bit odd for a business that has consistently, though quite naturally, had to distance itself from clearly documented human rights violations conducted on its behalf by Odisha government agencies to clear opposition to the project.

Moreover, syrupy mantras are unlikely to make it easier for a deal that has redefined the concept of work-in-progress in India: 10 years in the making, and far from getting off the ground. Near-future calls on the project will also help set the tone for industrial and environmental clearances.

The incumbent United Progressive Alliance (UPA) government, in particular Prime Minister Manmohan Singh, lost no opportunity to push the project. Posco seeks to build a steel plant in coastal Odisha, source iron ore from the state’s rich deposits in the north, and a captive port to ferry input and output.

To enable this, Singh’s government often looked the other way when Odisha’s Biju Janata Dal (BJD) government—which the Congress has continuously embarrassed with roadblocks for other, equally controversial projects such as Vedanta Resource Plc.’s bauxite mining proposal—strong-armed its way to procure land for the project.

Earlier this year, the government of Odisha granted the Indian arm of Posco a prospecting licence for the Khandadhar iron ore mines allocated to it. In turn, Posco has approached the Cabinet Committee on Investment to allow exploration.

Should the UPA return to power, a combination of the Congress’s ego, a foreign policy push and the BJD’s typical at-any-cost industrial policy will boost chances for the project. In particular, clearances for the Khandadhar mines, which Posco has linked to its starting construction on its 12 millions tonnes a year steel plant. Such a push could dismiss all concerns of environmental degradation, as well as the way of life of the Pauri Bhuiya, a tribe of shifting cultivators who live in the ecologically lush Khandadhar range. What worked in favour of the Dongria Kondh in the Niyamgiri Hills (and went against Vendanta’s bauxite mining proposal) may not work here.

It may get more complicated if a Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) takes office in New Delhi. In the run-up to polling that took place in mid-April, the BJP and former ally BJD traded charges. The BJP accused the BJD of violating the general election’s model code of conduct by recommending a prospecting licence for Posco. In turn, the BJD supremo and Odisha’s chief minister Naveen Patnaik was shrill—perhaps too shrill—in his counter-accusation that the BJP was raking up issues related to mining misdemeanours as an electoral ploy.

It is logical to expect a flurry of economic policy activity and project clearances if the NDA enters office. In particular, a carte blanche for bloody-minded policy execution in existing BJP satrapies in Chhattisgarh, Madhya Pradesh and Rajasthan. But the NDA may stop short of outright approval in all matters Posco.

With international scrutiny already on Posco’s project in India, with its violent journey of protests, beatings, threats, and pressured acquiescence to the project, a BJP-led NDA may be tempted to hang back from Posco’s integrated project, including its licence to prospect for ore, for reasons other than enmity with the BJD.

Indeed, the NDA may be compelled into this position even in this era of anything-goes politics, which might easily lead to a peace overture to the BJD in case of a hung Parliament. As a global cause célèbre, Posco is today a certified hot potato, and it may prove to be a convenient token of human rights exhibition for the NDA.

I’ve had veteran Indian human rights lawyers and researchers tell me that they have been approached by colleagues from South Korea with a curious, but not entirely unexpected plea: Posco is one of our better companies as far as human rights compliance goes; so go easy on it.

Tough call.

Sudeep Chakravarti is the author of Red Sun: Travels in Naxalite Country and Highway 39: Journeys through a Fractured Land. This column, which focuses on conflict situations in South Asia that directly affect business, runs on Fridays.

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Published: 24 Apr 2014, 06:19 PM IST
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