‘Vested interests’ to blame, says Tata Steel

‘Vested interests’ to blame, says Tata Steel

Kolkata: People with “vested interests" and “politics" were slowing the construction of Tata Steel Ltd’s proposed 6 million tonnes (mt) plant at Kalinganagar in Orissa’s Jajpur district, the company’s managing director H.M. Nerurkar said in Kolkata on Monday. The plant is to be built in two phases of 3 mt each, and its construction was to start earlier this year.

Construction of the Kalinganagar plant was stalled because about 100 families refused to leave the project site even though barely 20km away, Tata Steel’s ferrochrome project had raised people’s “standard of living". The resistance, it seems, is motivated by “vested interests and elements of politics", he added.

Nerurkar’s statement recalls Tata group chairman Ratan Tata’s allegation in August 2007 that political protests against land acquisition in Singur in West Bengal, where Tata Motors Ltd was building a small-car factory, were backed by “vested interests". The project was eventually abandoned, and the factory moved to Sanand in Gujarat.

Tata Steel had signed an agreement with the Orissa government in November 2004 to build the 6 mt steel plant. It has been facing resistance from local people right from the beginning because the project was initially seen as displacing some 1,200 tribal families. In January 2006, at least 14 people protesting against the steel plant died in police firing, following which the agitation intensified.

Even workers of the erstwhile Corus Group Plc—the Anglo-Dutch steel maker Tata Steel acquired in 2007—are giving greenfield projects such as the one in Kalinganagar a thumbs down.

Tata Steel has had to scale down Corus’ operations in Europe as the steel industry went into a tailspin soon after the acquisition was completed, and recently the Teesside steelworks in the UK was mothballed because of flagging sales.

A section of the British media has since been saying that Tata Steel is abandoning old steelworks and building new ones in India to cut carbon dioxide emissions. The immediate benefit to Corus is it would save a lot of money that it would otherwise have had to pay for exceeding European maximum emission limits, said the British media.

On the other hand, by building new plants, Tata Steel would be able to claim a substantial amount of money under the United Nation’s Clean Development Mechanism which allows companies in developed countries to buy carbon credits from those in India and other developing countries, the British media added.

Nerurkar said Tata Steel was looking to reduce by 2012 carbon dioxide emissions from 2.1-2.2 tonnes to 1.8 tonnes for every tonne of steel manufactured, but reiterated that the Teesside steelworks had to be mothballed because four key buyers “reneged on contracts". “There was excess capacity at Teesside... We tried running the plant for six months (despite flagging sales) to protect people’s jobs, but ended up losing a lot of money."

In Orissa, at least three global firms—the Indian arms of ArcelorMittal SA and Posco, besides Tata Steel—are looking to build steel plants, but almost all steel projects in the state have been delayed by protests over land acquisition. The competition is intensifying with more firms such as Sumitomo Metal Industries Ltd and JSE Steel of Japan looking to enter India.

To overcome resistance at the grass-roots level, managers need to speak the local language, Nerurkar said. “Because many of us have been brought up in cities, we do not understand the way things work in rural India."

Time has come for the Centre to intervene in Tata Steel’s project in Orissa, said Narayan Sengupta, director of MN Dastur and Co. Pvt. Ltd—a consulting firm, which has advised Tata Steel, Posco and ArcelorMittal on their projects in the state.

“Orissa should clearly earmark land that could be used for projects like these, and make sure companies didn’t have to face delays for families not agreeing to leave," Sengupta said, adding that for Tata Steel’s Orissa project, almost everything is ready. “Even some of its equipment has arrived."

But the long-term solution for problems with land acquisition in Orissa lies only in economic development of the tribal people there, according to Sengupta.