Mumbai: The deadliest attack on Indian security forces in four decades of Left-wing conflict underscores the challenge companies, including ArcelorMittal and NMDC Ltd, face in investing in mineral-rich states.
Maoist rebels killed 75 officers in an ambush on Tuesday in Chhattisgarh, where NMDC operates its biggest iron ore mine. In neighbouring states, ArcelorMittal, the world’s biggest steel maker, has yet to start two $10 billion (Rs44,400 crore) projects because of protests over land.
Resistance from property owners, some backed by Maoist rebels, and delays in approvals for land and mines have stalled at least $80 billion of projects in India that would double national steel output. Tuesday’s attacks are a setback to India’s efforts to rid the eastern states of left-wing guerillas and open up regions rich in iron ore, coal, bauxite and manganese to investment.
“If the global players had got a footprint in India, they could have really made a good return on their investment,” said Abhisar Jain, metals and mining analyst with ICICI Securities Ltd in Mumbai. “India as a whole will stand to lose if no global player is able to put up its plant here.”
The rebels have waged a violent campaign against the government, police and landowners since a peasant uprising in the West Bengal village of Naxalbari in 1967.
Prime Minister Manmohan Singh has described them as India’s biggest internal security threat.
Containing the Naxal movement is integral to raising India’s energy and mineral self sufficiency, Deutsche Bank AG’s Abhay Laijawala and Anuj Singla wrote in a 2 April report. Unless the Naxal resistance abates, the high levels of risk associated with doing business in Naxal infested areas will deter investment and potentially hold back the country’s economic growth trajectory as it grapples with mineral and energy deficiency.
ArcelorMittal, which aims to build two mills, one each in Jharkhand and Orissa, has yet to acquire land needed for the 12 million tonnes plant in Jharkhand, said a director at the state’s industries department, asking not to be identified as he isn’t authorized to speak with the media. The company has also yet to acquire land in Orissa. ArcelorMittal declined to comment on Tuesday’s attacks.
NMDC posted a 40% decline in third quarter profit after a pipeline used for transporting ore was damaged by Maoists. The Hyderabad-based company, in which the government sold an 8.38% stake last month, mentioned rebel attacks as one of the risk factors in the sale document.
NMDC said Tuesday’s incident hadn’t disrupted its biggest mine as the company protects its facilities with barriers and security patrols.
“Mining operations in the Bailadila mines are normal,” NMDC chairman Rana Som said in a telephone interview. “The mine area is surrounded by several layers of fencing and we monitor the area from watchtowers.”
Since October, the government has provided additional forces, intelligence and technological support to state governments to combat the rebels, whose demands include seizing land allotted by the government to companies and returning them to the farm and tribal owners.
India needs to counter the terror tactics that risk hampering industrial growth, the Federation of Indian Chambers of Commerce and Industry, said in a November report.
Investors, too, are reacting. The Church of England in February said it sold its Vedanta Resources Plc holding because the company hasn’t shown respect for local people. Norway’s state pension fund sold shares in 2007, citing environmental and human rights failures at four of the company’s Indian units. Vedanta said in February it pursues all investments in a responsible manner.