SEE&B Case-1

A case study of the Pohang Steel Companys (POSCO) proposed project in Orissa
Introducton The POSCO steel project is one of many coming up in the Indian state of Orissa, which is going through a steel revolution of sorts. Over the past five years, the state government has signed more than 40 MoUs worth Rs.1,60,132 crores with iron and steel companies, both domestic and foreign, mortgaging the 20 billion tons of iron ore reserves that its supposed to be sitting on. The fourth largest steel company in the world, POSCO, has managed to grab a big chunk of these reserves - about 600 million tonnes - which it expects to exploit over the next 30 years. The steel market, growing at an annual rate of more than 4 percent, just before the recent meltdown, had been witnessing a global boom since the beginning of this decade. This was what enticed POSCO to this eastern state to lead the revolution apart from the global race for cheap labour and raw materials (iron ore and coal). National and multinational corporations have been making a beeline to resource-rich developing countries to set up mega integrated steel projects and capture mineral resources (like iron ore and coal). The BJD-led government in Orissa has been a willing participant, laying the tracks for this race. It gave the Korean company a deal which it had not even considered the big domestic players eligible for. Controversy and conflict POSCO has faced hurdles from the very beginning in its journey to set up its integrated steel plant. Talks on the project began way back in August 2004, when POSCO and BHP Billiton, a global mining giant, from Australia jointly approached the Orissa government with a proposal to set up a 10-million tonne per annum (MTPA) capacity steel plant in the state. Welcoming the proposal with great enthusiasm, the state government agreed to sign a Memorandum of Understanding (MoU) by December 2004. The first stumbling block came when the company insisted on exporting iron ore from India. According to POSCO officials, the alumina content in Indian ore is 2-3 per cent higher than required, so it needs to be blended with ore imported from Australia. In the first week of April 2005, the Orissa government agreed to identify and earmark iron ore mines for POSCO. The Korean company sought mining rights for one billion tonnes of ore over 50 years. But state policy dictated that it was not entitled to more than 480 million tonnes for a 12-million tonne plant. Furthermore, existing rules did not permit the state government to offer mining rights for more than 25 years. Yet, it reserved the Gandhamardan and Malangtuli mines, with nearly 400 million tonnes of highgrade iron ore deposits, for POSCOs $12billion project. The state-owned Industrial Infrastructure Development Corporation directed the Jagatsinghpur district administration to reserve land at the Jatadhari river mouth near Paradeep port for the proposed plant. The Ministry of Commerce (MoC), Government of India, turned down POSCOs proposal in the second week of April 2005, saying it was against any project-linked exports of iron ore and if POSCO desired a long-term contract, it could enter into a deal with state-owned trading companies like the Minerals and Metals Trading Corporation (MMTC). Following this, POSCO, called off the MoU signing programme scheduled for April 14, 2005. However, the Orissa government and POSCO officials continued to maintain that the project was not off. Around the same time, the company finalised Paradeep in Orissa as the site for the proposed steel plant. Duburi and Dhamra were identified as possible alternatives. However, there was still no sign of progress on signing the MoU with the state government. On May 16, 2005, the then Union Finance Minister P. Chidambaram convened a meeting with Orissa government officials and key POSCO executives to discuss the slow progress of the project. By now, POSCO had climbed down from its earlier position and was ready to set up the plant without exporting ore. The company had also scaled down its ore requirement.

The much-awaited MoU was finally signed on June 22, 2005. The Orissa government eagerly lapped up POSCOs offer, which Brazil had rejected earlier on the grounds that the company was not ready to pick up ore at market prices. Even investor friendly China had given the POSCO deal the thumbs down, refusing to open up its vital ore reserves to foreign investment. In order to understand and scrutinise the exact deal that took place between POSCO and the Orissa government. What the project is all about The MoU essentially promises to facilitate the establishment of the project with the following components i. 12 Million Tonne Steel Plant and Captive Port at Jagatsingpur district spread over an area of 4004 acres. ii. Captive Mining facilities for iron ore and coal in the areas allocated by Government of Orissa/Government of India (the Mining Project). Proposal for prospecting the Khandadhar mines (Sundergarh) for iron ore spread over an area of 13000 acres. 600 million tonnes of ore to be sold at Rs.24/- per tonne (Royalty Rate) along with permission for swapping of low grade ore by exporting and replacing with imported ore. iii. Infrastructure - road, rail and port infrastructure (the Transportation Project), including the dedicated railway line from the mine-belt to Paradeep; iv. Integrated township spread over an area of 2000 acres apart from 25 acres for office at Bhubaneshwar. v. Water supply infrastructure (the Water Project) - 12000 to 15000 crore liters from Jobra barrage river Mahanadi. vi. Grant of SEZ status for access to subsidies and tax holidays. The magnitude of the project and the extent to which the state government will be supporting the multinational are clearly reflected in the various clauses that promise expeditious clearances and approvals under various mining, land acquisition and environmental legislations. The MoU not only had a clause for selling iron ore providing a discount of Rs.2,000 for every tonne but also gave the company the right to swap the ore. This meant it could export ore of high alumina content and import ore of lower alumina content. This clause came in for severe criticism within and outside the state. Once the MoU was made public, it came in for severe criticism from activists and peoples groups across the country. It was obvious the Orissa government was bending over backwards to please a multinational company and be recognised as the state with the biggest FDI. The legal validity of the document has also come under scrutiny. Usha Ramanathan, lawyer and researcher in her critique of the MoU states that, The undertakings made by the state government prejudice the issues of grant of necessary license, consent orders and permits to the company. These decisions will be made on the basis of the contractual mandate of the MoU. In fact, the grant of such permits has been rendered a fait accompli by this MoU. As such, the MoU stands in contravention to the established principles of administrative law. More problematically, there is a real danger of the state government finding itself bound to the promises made in the MoU, particularly if the company acts upon the promises made therein. However, the criticism failed to deter the company or the government, which knew it had strong constituency in the middle class and intelligentsia, based in Bhubaneswar. These sections have been more than overwhelmed by the benefits projects like POSCO would bring for developing a backward state like Orissa. A summary of happenings so far The company began its operations in India by registering POSCO-India, its Indian arm. The first attempt

by the district administration to acquire land in the plant and port site was thwarted by strong local opposition starting early 2006. This was followed by the formation of the POSCO Pratirodh Sangram Samiti (PPSS) based at Dhinkia village spearheading the movement against POSCO. Movements against displacement from across Orissa and the country have shown solidarity with the local struggle. The company meanwhile engaged in extensive media servicing. Regular press releases were issued highlighting the benefits of the project. The company maintained that all was going as planned even though the project was finding it difficult to take off. This has been the stance of the company despite the following issues - the prospecting license application for the Khandadhar mines after much controversy remains to be granted; the forest clearance for the port and plant stand challenged by environmental activists and have yet to be granted; and most importantly majority of the local people at the plant and port site refuse to part with their land. With the new legislation on the Forest Rights Act (passed in 2006) the individual and community rights of local communities on forest lands both at the plant site (Jagatsinghpur) and proposed mining area (Sundergarh) stand to be recognised and considered inalienable making forced acquisition open to being challenged legally. The only consolations for POSCO have been the in-principle approval for an SEZ status given to the project by the Union Ministry of Commerce (MoC), and the Supreme Court directives for timely accordance of clearances for the various components of the project from the state government and Ministry of Environment and Forests. Despite the issues of conflict in this project the role of the state government has been one of protecting and promoting the companys interest. Tthe government has used several tactics to break the movement led by PPSS. The most prominent events being the use of local goons supported by the ruling BJD to divide local people, false propaganda and attacks on agitators, like the one on the demonstration on 29 November 2007, following which section 144 was declared in the area restricting mobility of local people. Though in a show of strength on April 1 08 a massive rally jointly organised by PPSS and movements across Orissa reclaimed the area under siege denouncing section 144, the state and company declared that they had no intention of backing out of the project. Through the arrest of Abhay Sahoo, the leader of PPSS, and some other key activist, the state government reiterated this stance in October 2008.

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Impact on local livelihoods and the environment

Before looking into the larger implications of the POSCO project, it would be relevant to study its likely impacts on local livelihoods, the economy and the environment. The local communities at the proposed plant site in Jagatsinghpur have been opposing the project tooth and nail for the past two years, objecting to the forced acquisition of their lands. The MoU shows that the project has several components, which means it would have diverse implications, both issue-wise and region-wise. The region involved covers the coastal area of Jagatsinghpur, where the plant and port is to be built, as well as the northern district of Sundergarh, where the mining lease is likely to be granted. At stake is the socio-economic and environmental future of this region, with its wider implications at the policy and developmental levels for the nation as a whole. The plant and port site Located about 10km from Paradeep port, the proposed plant area would affect seven revenue villages comprising 11 hamlets in three gram Panchayats of Erasama block in Kujang tehsil (Jagatsinghpur district). According to the Kujang tehsildar, the total land area sanctioned by the state government for the project is 4,004 acres, of which 3,566 acres is government land and the remaining 438 acres private land. In all, 471 families would be affected, as per official statistics quoted below: Gadkujang Panchayat: Polang village - 62 families, Bhuyalpal village - 12 families, Nuliyasahi village 135 families. Dhinkia Panchayat: Dhinkia village - 162 families, Gobindapur village - 90 families.

 Nuagaon Panchayat: Nuagaon village - 10 families. The 2001 census shows that the three Panchayats have 3,350 households with a population of 22,000. Almost a third belongs to the Scheduled Castes. Local leaders of the anti-POSCO movement say the entire population will be affected by the project. Historically, Kujanga was part of the kingdom of the Sandha dynasty. With the coming of British rule, the land became part of the zamindari of Bardhaman Pradhan, who distributed fields to the villagers to cultivate the betel vine. This is the main crop of the region. In his report No to POSCO, former SC/ST commissioner Dr B.D Sharma describes the people of the area thus: Paan, dhan, macch (beetle, paddy and fish) the trinity is the essence of their life. to make ends meet. There are around 5,000 vines in the three Panchayats tended by about 10,000 cultivators The standard investment for paan cultivation is Rs.15,000-20,000 per acre, which can be recovered within a month. The average annual income is Rs.1 lakh per acre, with another Rs.1 lakh of ancillary employment being generated. Many landless families depend on basket making (for packaging paan) or work as daily labourers on the betel vine farms for their livelihood. Around 30 lakh paan leaves are plucked, bundled and transported to Mumbai, Bangladesh, Pakistan and Saudi Arabia every year. In summer, cashew cultivation is the main livelihood activity in the area. A family engaged in cashew cultivation earns about Rs.20,000 per season. An average cashew bush yields 100kg of nuts a year worth Rs.4,000. About 50 percent of the families are also engaged in pisiculture, mostly prawns. An acre of farm ponds yields prawns worth Rs.7 lakh a year. Many other families fish in the Jatadhari estuary - all 108 families in Nolia Sahi hamlet of Gadkujang village depend on estuarine fishing for a livelihood. The average daily catch per person is about 20 kg. The hamlet sells around 1.5 quintals of fish every day, the daily earnings per family ranging from Rs.100 to Rs. 5,000. Apart from catering to the local market, a significant portion of the catch is transported to Cuttack for sale. On July 13, 2005, the hamlet was served a notice asking for details of the total number of families in the area. The tehsil office does not have a proper record, since a large number of people had migrated here from Midnapore (West Bengal) as labourers during the construction of the Paradeep port. Said one fisherman: My grandfather came here to work in constructing the Paradeep port, which is itself almost 50 years old. More people have migrated since then and the government has provided titles to many of them for their homestead lands. However, there are a substantial number of families that cultivate the land with no recognised titles. Official statistics show that only 438 acres of the 4,000 acres required for the POSCO site are private land, the rest being government land, recorded as under forest or anabadi. Government records do not show that most of this land has been under betel, cashew and other cultivation for generations. The local people have submitted applications for title claims several times but the government failed to initiate any regularization and settlement of the betel vine lands. This is one of the reasons why resistance to POSCO is so strong. The people know they stand to gain nothing, not even entitlement to rehabilitation, if they lose their land. This reality, however, gets a new dimension with the new legislation on Forest Rights Act passed by the Indian Government in 2006 which recognises community rights over forest lands. The project affected area has a wide strip of land along the shore that is classified as forest land and is under the jurisdiction of the forest department. This strip of land has an interesting history. It was transferred to the forest department after a struggle led by a local communist leader, Loknath Chowdhary. He demanded transfer of the land to the forest department so that afforestation could be carried out to provide a natural barrier to protect the villages against cyclonic storms and to provide the basic needs of firewood and stalk for betel vine cultivation. The land was categorised as gramaya jungle and trees were planted on it. Over time, some families took up cultivation on this land as well. The proposed port to be built at Jatadhari has also raised environmental concerns. Conservationists have pointed out that any damage to the coastline by the construction of the port could pose a threat to the nesting habitat of the endangered Olive Ridley turtles. Especially at risk are the turtle-nesting beaches in the Gahirmatha Marine Sanctuary, where nearly 400,000 turtles come to nest every year. A newspaper

report points out that "the nesting turtles are already threatened by illegal mechanised fishing, rapid loss of nesting beaches due to casuarinas plantations and industrial pollution. The proposed port poses a fresh threat. If built, the port would also directly affect the livelihood of the fishing communities because the Jatadhari estuary serves as a spawning and breeding ground for several species of fish. Jagatsinghpurs rainfall drains into the sea through the Jatadhari river. If they block the river by building a port, the area will get waterlogged, so we think the port is a completely illogical idea, says Abhay Sahoo, a local leader of the Communist Party of India (CPI) who is at the helm of the anti-POSCO movement in Jagatsinghpur. It is astonishing that the rural way of life and economy still thrive here despite heavy industrial activity in the vicinity. The affected Panchayats are barely 10 km from Paradeep port where several industrial units have come up over the past few decades. We have seen the coming up of Paradeep port, PPL, Oswal, IOCL -- people have only lost their lands and gained almost nothing in return. Besides, do you think companies will hire women like her, says Suru Anna pointing to a woman packing betel leaves back at the village. The other major impact of the captive port will be on the existing Public Sector Paradeep Port. After the Ministry of Shipping made some noise on the probable impact of the shipping traffic and new construction on the existing Port the Central Water and Power Research Station (CWPRS) had been apparently asked to do an impact study of POSCO's captive port on adjacent areas. However, when the officials of CWPRS were asked about this, they denied having conducted any such study. Further, the drawing of millions of litres of water from the Mahanadi river is expected to affect the irrigation and drinking water requirements of five districts, apart from Cuttack city. While POSCO has promised the creation of 45,000 jobs, directly or indirectly, through its activities in the region, those opposed to the project calculate that the steel plant, port and mines put together will affect many lakhs of people. The mining area The bigger threat, many feel, will be faced in the proposed mining sites in the districts of Sundergarh, which are already reeling under the social and environmental impacts of large-scale mining activity. The Khandadhar Hill Range, little known to people outside Orissa, where it is located, is a part of the Eastern Ghats and extends from a place called Suakanthi in Keonjhar district to Bonai in Sundergarh district. The range is more popular, especially amongst the states tourists, for its two enormous waterfalls, one on the Keonjhar side in Bansapal and the other, more taller one, almost 244 metres, in Lohanipada block, Bonai tehsil of Sundergarh district. Emerging from a perennial stream, Karapani Nala, the waterfall on the Sundergarh sides feeds into the Brahmini river less than 5 kilometres away. It is a steep, rough but brief ascent from the forest at the base of the hill to the most accessible spot where the mighty Khandadhar waterfall greets you with its gushing yet calming sounds. The Saal (Shorea Robusta) forests do a good job of providing cover to the rock face along which the waters of the Karapani descend like silver tresses. Fearing the wrath of goddess Kanteshwari who, it is believed, resides in a cave in the Khandadhar forest, the Paudi Bhuiyans, a primitive tribal community, who inhabit the forests in this region worship the Khandadhar waters and forests with reverence. Collection of non-timber forest produce, apart from agriculture, is the main source of self sustenance. Cultivation of paddy and Mandiya, Kulath, Gangai, Rumha (all indigenous lentils and millets) is common. The Paudi Bhuiyas traditionally practiced shifting agriculture locally referred to as Podu. This is done in a two year cycle in specifically demarcated areas (small hillocks around the village) decided upon collectively. Over the years many of them have been given legal titles to fixed land plots but villages closer to the base of the Khandadhar hills still practice Podu. Unfortunately for the Bhuiyans, Khandadhar hills are repositories of good quality iron ore deposit with 69 percent iron content, being eyed by many of iron and steel producers till recently when the State government announced that it is likely to clear the prospective mining license to POSCO for mining 600 million tons of iron ore. Eight Gram Panchayats of the Lunipada block with more than 50 villages within a 10km radius of Khandadhar will be directly and indirectly affected by the mining activity that POSCO

proposes to carry out in an area of 6,000 hectares. These panchayats include Talbahali, Kuliphose, Phuljar, Haldikudai, Saskekla, Bhotuda, Khutenga and Kouida, informs Ashwin Mahanta, a resident from the area who has been working on forest conservation and protection with the adivasis for the last 10 years. Kishore Chandra Giri from Phuljar, one of the twelve Panchayats to be affected, is quick to react to any question about the project. The Orissa Mining Corporation has its mines 8 kilometres from our village. They have brought us only trouble. They have ruined the agricultural lands around the mines by dumping wastes on the land and in the streams and our bamboo groves are completely destroyed he laments. But what bothers him more is the plight of his fellow villagers. 20 of them working on the mines, all of them are today suffering respiratory disorders. There is no one to hold to account as the contractors keep changing, he adds. So the local communities are not completely unaware of what the POSCO project many times larger than the OMC mines is likely to bring with it. The communities around Upper Khandadhar hills where the Koida mines are being operated by private companies are facing similar problems. Not far away from the Lohnipada, where the 12 Panchayats to be affected by POSCO are located, is the Bonai block where the highly polluting Sponge iron factories are spewing poisonous gases into the air. If looked at aerially, the Lohnipada section of Khandadhar is the only region that has been spared of factories and mines till now. The POSCO project is going to alter this permanently. Vasundhara, an NGO based in Bhubaneshwar is conducting a Comprehensive Biodiversity Study of the Eastern Ghats. The GIS survey done in a 10 km radius of the Khandadhar hills as a part of this study indicates that in an area spread over more than 30,000 hectares, more than 65 percent are under dense and open forests. Agricultural land is spread over 10,000 hectares forming about 32 percent while about 412 hectares in under habitations/settlements adds a member of the organisation. More than 26 streams from the Khandadhar hills flow into the Brahmini river and hence the range forms a critical watershed in the region. While the social and environmental costs of this project if accounted for would render it completely unfeasible for the state, several analysts have raised questions regarding the very economic sense of the plan, specifically the mines. POSCO has been promised a flat rate o f royalty at Rs. 27/tonne of iron ore to the Government of Orissa. This results in less than Rs.1620 crores to Government of Orissa over time of the contract of 600 Million Tonnes. Till early this year the global market rate of iron ore was over USD100/tonne. Now with the recession the iron ore prices have taken a beating. Going by the earlier rates, for 600 million tonnes of iron ore (that POSCO would mine) the price would amount to Rs. 240,000 crores. We suddenly realised that POSCO has effectively been given this ore free. Accounting for mining costs and the total investment package (less than 10% of the costs) the people and the state of Orissa are getting less than 1 percent of open market price of iron ore say economists Sanat Mohanty and Sandip Dasverma in their analysis.

Grassroots protests and politics

The opposition at the plant and port site built up rapidly when news of the project spread. While there were mixed reactions initially, the communities soon realized that they faced the threat of losing their land without gaining anything in return. The news of the MoU to be signed was already out in early April 2005. The MoU was signed in June and by July the three Panchayats under threat came together under an umbrella organisation called the POSCO Kshatigrasth Sangharsh Samiti (PKSS) to oppose the project. However, many Panchayat members were supporters of the Biju Janata Dal (BJD), the ruling party that had signed the MoU, so doubts began surfacing about the dependability of this forum in confronting the government. Expectedly, the PKSS split by January 2006, with some key members coming out openly in favour of the project. The opposition however, continued, but under several different leaders. Till last year three separate groups were opposing the plant. The most prominent of them has been the POSCO Pratirodh Sangarsh Samiti (PPSS), led by Abhay Sahoo of the Communist Party of India (CPI), with a stronghold in Dhinkia Panchayat, with most households there opposing the project. The other group with a political

affiliation was Bhita Mati Bachao Andolan, dominated by the Congress which has been more or less inactive. The third group, Nav Nirman Samiti, is a voluntary effort spearheaded by the Rashtriya Yuva Sangathan, the youth wing of the Sarvodaya movement that follows Gandhian principles. The group used to be active around Nuagaon Panchayat. The groups, though united in opposition, differed on some basic issues. Rashtriya Seva Dal (RSD) activists felt that the CPI, which dominates the PPSS, is politicising the issue and were not comfortable with political parties dominating the anti-POSCO struggle. There are ideological disagreements as well. The RSD claims the CPI position on the project is weak because they are not against industry per se but are only asking for a change of site and they dont have a problem if an alternative site is proposed. Contends Akhay Kumar, one of the persons active in the struggle, We want a value-based struggle that takes a clear ideological line in opposition to the neo-liberal agenda. However, CPI presence in the area is not new. The Erasama constituency was a stronghold of the party in the post-independence period during the tenure of Loknath Chaudhary, who was also a member of parliament (MP). He built local cadres in some pockets like Dhinkia Panchayat, earning a lot of goodwill in the process because of his honest approach. While the member of the legislative assembly (MLA) from the area, Damodar Raut, belongs to the BJD and was State Minister for Panchayati Raj, the CPI also has strongholds in some pockets. Abhay Sahoo, state secretary of the party, was sent to the area in July 2005 to lead the anti-POSCO movement and mobilise the party cadres. Over time people developed a faith in the consistent and focused leadership provided by him to the anti-POSCO movement. According to him, the CPI does not own the anti-POSCO movement; it merely provides the leadership. He sees it as a peoples struggle. The PPSS has 21 members in its executive committee who are chosen by the people, he says. Despite these differences the villagers had come together under these various banners on every occasion to raise their voices in protest against the project, barring those few families that agreed to sell their land. The key strategies of protest used so far include: Picketing POSCOs local office. Holding rallies and demonstrations. Gherao and detention of government and company officials entering the area Blockading the area to prevent the entry of all government and POSCO officials The most effective strategy to stall progress of the project has been the setting up of check-posts in the area by the local communities. These check posts, where women and children keep a 24 hour vigil, have restricted the movement of local officials and POSCO staff at the project site. Initially, PPSS also demanded a political dialogue with the Chief Minister but none of his senior ministers expressed any desire to meet the local representatives or talk with them. The state government has instead responded with backhanded tactics to divide the movement. On the mining site front, in August 2007 the Khandahdar Suraksha Samiti under the leadership of BJP All India Vice President and MP from the area, Mr Jual Oram submitted a Memorandum to the Governer of Orissa demanding that the mining lease to POSCO should not be granted considering the impacts on the local environment and life. The Memorandum states The Khandadhar Water fall a 245 meters cascading side is not only a place of tourist attraction but a natural flow of irrigation system that caters the needs of six to seven Gram Panchayat located in Lahunipara Block under Bonaigarh Sub-Division of Sundergarh district. Any de-mutation of volume of water from Khandadhar River will affect thousands of families whose vocation is agriculture. There is a proposal of leasing out Khandadhar Hill range to the POSCO for lifting of Iron Ore. Our bitter experience has been that a small mines been operated by OMC in these area has greatly diminished the flow of water. Any large scale excavating and lifting of iron ores will dry up the water fall of Khandadhar. Subsequently, the MP has been silent on the issue, not surprising considering that the party is in coalition with the ruling BJD who is a staunch supporter of the project. Similarly the CPM as well as the Congress Party formed their own organisations to oppose the mining lease but did not sustain the momentum. In early January, 2008, an autonomous group, Khandadhar Suraksha Sangram Manch (KSSM) was organised that would be separate from party influences. The

group is yet to gear up mobilisation activities in the area but it is clear that the heads of the villages are not likely to allow the project. We have already driven away POSCO officials from the area when they came to negotiate with us, says Ashwini. Response to the opposition All through, the state government continued to turn a deaf ear to any questions raised about the project touting the employment generation argument to those who oppose it. But how valid is this argument? In reply to a question raised in the parliament on the employment expected to be generated by the company, Union Minister of Mines Ram Vilas Paswan said the steel plant, mines and port together would generate direct employment for 13,000 people and indirect employment for another 35,000, giving a total of 48,000. The company promised to reserve 98 percent of the jobs for Indians. However, this still does not guarantee employment for those who will be displaced by the project. According to environmental and social activist Prafulla Samantara, If we look at the number of people this project is going to adversely affect, directly as well as indirectly, it would be an estimated 2.5 lakh, which is much more than the employment that will be generated. The Union Minister also made the following statement in Parliament in the context of employment generation by the mining activities: At the current level of mechanisation, if all the reserves are open for mining, it will generate prorata employment of 51 lakh persons. However, experiences of iron ore mining indicate that in large mines there is more mechanisation and lesser direct employment. Mining is an independent economic activity and government has no control over production and employment in this sector. The same is determined by market forces. The National Advisory Council (NAC) of the UPA, under the chairpersonship of a Congress party leader Ms Sonia Gandhi, did raise a few questions and tried to seek clarifications from the Orissa government in 2006 but that seemed more of a passing concern than genuine interest. Today the NAC is a virtually defunct body. Even the Prime Minister issued statements stating that the project is being supported and land acquisition needs to be expedited. Despite this the key factors that slowed down movement on the project are: The sheer magnitude of the project and its three interlinked but distinct components -the captive port, steel plant and mines - which have each faced separate procedural hurdles and protests at every point. The regular and consistent questions raised by the opposition in the parliament, by the Congress opposition in the legislative assembly at the state level, and by the left parties at both the state and centre levels. _ While the media has been well serviced by the company and dominated by proproject middle and upper middle class opinions, there has also been significant reporting of the predicted negative impacts of the project. _ The police firing and death of adivasis opposing the Tata Steel Plant at Kalinganagar in January 2006, and more recently in Nandigram, West Bengal over forced acquisition of land by the state has played a major role in putting pressure on the BJDled government to tread cautiously in the POSCO case. _ With the state Legislative Assembly elections around the corner (early 2009), and many of the opposition parties raising issues with the Project, the pressure on the BJD led government intensified further preventing it from taking extreme measures to procure land for POSCO. While the District Administration condemned the blockading of the area by the communities and also registered several criminal cases against activists in the area from early on, police presence was minimal till April 2007. The government, which openly supports the project, could have used force against the communities - Orissa has a history of doing so. But it has not used overt force till now. This time around

it relied on using subtler and covert methods. Force does not necessarily mean violent oppression. Other methods are being used to break the community unity as well as the peoples resolve, for instance by booking of false cases, says Sudhir Pattnaik, an independent journalist and activist in Bhubaneswar. This is not far from the truth. Early in the year the local administrative authorities were involved in ensuring that the Panchayat elections, which faced several instances of booth capturing and clashes, went off smoothly without problems. While the polls could not take place in Dhinkia, the other two Panchayats saw those opposing the project winning the elections. In February 2007, however, the heat was turned on, with police and the local administration bickering with the locals over barricades set up in the area. The announcement of the Environment Clearance Public Hearing for the steel plant and captive port at Jatadhari in the newspapers (in March 2007) made clear that the government intended to wholly back the project in the face of local opposition. The state, which has resorted to violence many times in the past to suppress peoples movements against unjust development - like Kashipur (Alcan), Kalinganagar (Tatas), Lanjigarh (Sterlite-Vedanta) - once again lived up to its reputation, deploying platoons of paramilitary forces around the villages prior to the statutory public hearing. The state administration chose to hold the hearing at Kujang, the stronghold of the ruling BJD party, to make sure that people who would be affected by the project stayed out of the hearing. Though the Superintendent of Police, Jagatsinghpur claimed the deployment of Orissa Military Police platoons at Kujang was routine, the locals had a different explanation. They said the platoons were used to create an atmosphere of fear in the villages. They cited this as a reason for people not attending the hearing on April 15. The company also mentioned in several media releases that it has engaged the Tata Institute of Social Sciences (TISS) to carry out a Social Impact Assessment (SIA) to help it in formulating a rehabilitation package for the communities. However, few researchers have been allowed to enter the area by the local people. This did not stop the company from hiring young locals and paying them to carry out the survey work. The women of Nuagaon were not impressed by the activities of these youth. These anti-social elements have been running a misinformation campaign, doing false propaganda and vitiating the atmosphere in the villages. They hardly worked and only disturbed the peace of the village, they said. There have been instances of the youngsters creating conflicts and filing false cases (almost 70 cases) against those opposing the project. Tension in the area intensified after in October and November 2007. On 21 November, a group of employees of the Hyderabad based Dharitri Company attempted a puja to start the dredging work of river Jatadhari claiming that it was a contract job of the oil refinery in Paradeep. The agitating villagers were obviously suspicious and asked the employees to leave the place. But, the chief of the local Mahaveer Peetha (a place owned by fundamentalist Hindu groups) who was supposed to perform the Puja entered into a verbal duel with the agitators which ultimately resulted in a conflict causing injuries to a few people from both sides. Their chief called Raju Baba, a close associate of ruling party MLA, and his henchmen on 23 November 2007 broke the check gate constructed (to prevent the entry of POSCO and state officials) by the protesting villagers. A procession of anti-POSCO villagers marching towards Nolia Sahi to repair the check gate were attacked by an armed gang under the leadership of Raju baba on 25 November 2007. The brutal attack led to many women and agitators getting critically injured. Following this the police barricaded the entire area sending in police platoons to keep vigil and declaring section 144 to restrict public mobility and gatherings. This affected the local movement and was seen as a ploy to dissipate the agitation to facilitate a socioeconomic survey by the administration for the project. The survey was never completed, in the face of growing resistance, and yet the company announced that the ground breaking ceremony would be held on 1 April 2008 as planned. 1 April, is also celebrated as Orissa Utkal Diwas, and the PPSS decided that they would not allow any ground breaking to happen. A huge rally demonstration was announced with a single agenda to reclaim the entry point into the area at Balitutha, which had been under siege by the police and local administration. Following this the ground breaking was called off by the company at the last minute. The cancellation, however, failed to deter the 2000 marchers who had gathered under the banner of PPSS who organised a rally with the support of
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people from other peoples movements across the state and party workers from parties like CPI and CPI ML Democracy. Although the 1 April 2008 rally in Kujang was a critical milestone in the three-year anti POSCO agitation, the battle seemed far from over. In August 2008 the Supreme Court of India while taking a call on the Forest Clearance recommendations on POSCOs project asked the State government to expedi te the process to allow the company to go ahead with its plans. But the real blow to the movement came on 12 October 2008 when Abhay Sahoo the leader of PPSS was arrested and put under judicial custody, charged with 25 criminal cases. The PPSS has resolved to continue the agitation as support and solidarity flows in from across Orissa and the country. The peoples movement against POSCO has received solidarity by declarations of support from several Korean social organisations including the Korean Confederation of Trade Unions (KCTU) and Korean House of International Solidarity (KHIS), on February 19, 2008. In July 2006, POSCO was in the headlines in its home country when almost 2,000 workers of one of its subcontractors forced their way into the POSCO head-office building in Pohang and staged a week-long sit-in there. Led by their regional union, the workers were demanding higher wages and better working conditions. POSCO come under scanner for environmental issues. Recently, Vietnam rejected POSCOs project on the grounds of potential environmental impacts of the planned steel mill in a coastal area. The United Steel Workers (USS-POSCOs steel workers union) in March 2008 also condemned the November 2007 violence in Kujang and appealed to the company through a letter to withdraw the project. At the national level petitioning, conventions and rallies have been held in solidarity with the movement. After the arrest of Abhay Sahoo and other PPSS activists a solidarity forum called POSCO Pratirodh Solidarity has come together to support the Anti-POSCO campaign with the following demands:
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Withdrawal of all cases against Abhay Sahoo and other PPSS activists. Immediate and unconditional release of Abhaya Sahoo and other PPSS activists. Immediate withdrawal of police forces which have surrounded the area affecting the day-to-day life of the people. Scrapping of the POSCO project, which has been strongly resisted by the local people since it displaces people, violates their land rights, deprives them of their livelihood and destroys natural resources and the ecology of the region. Stop repression on people fighting to protect their lands and resources throughout the state.

Growth of mining and mine based industry An overview

The trends The political dynamics that have unfolded in the POSCO story narrated above are not necessarily unique in the history of mine based industrialization in India. The tales of social marginalisation and exclusion, environmental devastation and conflict of interest have dominated the mining scenario of the country from the pre-independence period. The establishment of the Tata Steel Plant in Jamshedpur of erstwhile Bihar in early 1900s met with tribal agitations and workers struggles both crushed, often using violent means, a trend that continues to date (Jayaraman, N 2006). The most jarring recent example is of the police firing at adivasis opposing Tata Steels project in Kalinganagar, Orissa in 2006. Barring a few private capitalists like the Tatas, the post-independence mining sector remained was controlled largely by the State. But problems of displacement of indigenous populations or exploitation of mine workers continued to prevail. The establishment and running of NALCO, BALCO, NMDC, Mahanadi Coal fields all Public Sector undertakings are also ridden with examples of gross human rights violations. However the most critical differences in the narrative around mining in the privatisation scenario as opposed to the time, between 1950 and 1990 when mines and mine based industries were largely in the Public Sector, can be attributed to: massive growth in size and magnitude of the industry itself

 devolution of powers to state governments opening up of the market and industry to foreign capital The world in the past few decades looked upon the growth of industries like steel and aluminum as an indicator of overall economic growth. Since more than 42 percent of the worlds steel is used for construction and infrastructure building, growth in the steel sector is considered to be directly proportional to the development of any country. As a result one of the key developments in the mineral sector in the wake of economic reforms in India was the Mineral Policy of 1993 and the amendments to the Mines and Minerals Act 1957, which brought about the following changes: Deregulation of the mining sector by allowing 50 percent investment by foreign companies in mining. Opening all non-atomic and non-mining minerals to private investment. Increasing the validity period of prospecting licenses and mining leases Almost doubling the area under a single license. In December 1999, the Act was renamed the Mines and Minerals (Development and Regulation) (MMDR) Act, 1957 and further changes were incorporated, including: Introducing a provision for reconnaissance permits. Raising the cap on foreign direct investment to 100 percent in February 2000. Giving the states the right to grant leases for exploiting 15 minerals, with the other major minerals still remaining in the hands of the central government. Simultaneously the new industrial policy of the 90s also opened up the steel sector for private investment by (a) removing it from the list of industries reserved for the public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment were freely permitted up to certain limits under an automatic route. India produced around a million tonnes of steel at the time of its independence in 1947. By 1991, when reforms to open up the economy were initiated, steel production grew to around 14 million tonnes. Thereafter, it doubled in the next 10 years. Today, India is the sixth largest producer of iron ore as well as steel in the world. Production of finished (carbon) steel stood at more than 42 million metric tonnes in 2005-06 (Ministry of Steel estimates, www.steel.nic.in). The global steel industry experienced a rapid revival post-2001, crossing the 1 billion tonne production mark in 2006, or 15 kg of steel for every person in the world! Orissa had only two iron and steel plants until 1995. Growth in the iron and steel sector remained marginal in the 1995-2000 period but saw a rapid spurt in the post-2000 period. Today, there are 14 steel plants in Orissa. In addition, four plants are now producing pig iron at Kalinga Nagar and Barbil. However, the state-owned Rourkela Steel Plant is the only large integrated steel plant in the state as of now. The government expects this to change significantly with the spate of investments flowing into resource-rich states in eastern India, like Orissa, Jharkhand and Chhattisgarh. Over 102 MoUs have been signed by different state governments, adding up to 103 million tonnes of steel capacity and over US$5,994 million in investments. According to the Ministry of Steel, the Indian governments target for the steel industry stands at 110 million tonnes by 2019-20, an achievable figure if all the MoUs signed recently come through. Similarly in iron ore India is the fourth largest producer in the world its production being around 120 million tonnes per annum (2004). An important development in the iron ore sector was the export policy for raw materials which was formulated under the 2004 Foreign Trade Policy allowing flexibility in export of minerals. In 2004, for instance, iron ore exports touched 78 million tonnes, which was about 50 percent of the iron ore produced in the country that year. In 2005-06, India exported almost 90 million tonnes of its 165 million tonne iron ore production. Owing to the opening up for private and foreign players, a sector once largely dominated by public sector undertakings (PSUs) has seen large-scale

deregulation over the past 20 years. The country witnessed a spate of disinvestments in mine-based industries (essentially producing aluminum and steel) during this period. The government divested its shares in NALCO, NMDC, Hindustan Zinc Limited and many other PSUs. The process continues today and there has been substantial controversy over the BALCO disinvestment in recent times. The mining industry in India has grown at more than 10 percent in the post-reforms period (between 1993 and 2003) as the mining sector was opened up for private and foreign investments. In this period 73 FDI mining project proposals have been cleared. Some of the major companies include POSCO, De Beers, BHP Billiton, Mittal and Rio Tinto. Though not visibly in the forefront, developed countries are increasingly looking towards growth of assets by setting up their production and manufacturing facilities in the global south, closer to the mineral supplies. Reduction of costs and access and control over fastdepleting mineral resources (iron ore in this case) are the major factors here. Consolidation is the catchword today in the steel industry. The last two years saw the Mittal-Arcelor and Tata-Corus mergers in the steel sector. The push behind such moves is the fact that the top 15 steel-making firms in the world contribute only 1/3 of the global steel output. These companies are now looking at acquiring smaller producers in order to consolidate production and reduce volatility in the global steel market.
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Issues of concern The fallouts of these trends in the global and national mining industry can be classified into two categories. First the direct socio-economic deprivation and environmental devastation as a result of unregulated growth of the sector. Second the political dynamics emerging from the corporate-state nexus to facilitate this growth either using the law or violating it. The deadly combination of the two has meant a gradual erosion of the different pillars of democracy leading to conflict and severe human rights violations. Depleting resources During the last three decades, cumulative exports of iron ore were over 1 billion tonnes of mostly high grade ore. A study by the National Council for Applied Economic Research (NCAER) cautioned that reserves of high and medium grade iron ore in the country would last for a mere 19 years even if expo rts are capped at the present level. However, this has not acted as a deterrent for a country on the path to globalising its economy by exploiting its mineral wealth. In Orissa alone, which is the leading producer a iron ore, the current steel production of 2 MTPA is expected to rise 56 MTPA in the next five years. This will require 2250 MT of iron ore an additional 527 MTPA. The iron and steel industry with its forward and backward linkages is considered to be a resource guzzling one requiring large amounts of land and water apart from the raw materials like iron and coal. As mentioned before, there has been a quantum leap in the scale of mining and size of mine based projects as well. In the last five years alone more than 350 mining leases have been granted covering an area of 39,000 hectares the largest ever. Of the total area almost 29 percent will be for iron ore mines. Interestingly a large part of this land is under forests, especially in states like Orissa, Jharkhand, Chhattisgarh and Madhya Pradesh. The ecological losses and the resultant depletion of natural resources like water are not even calculated in the costs of the project. Since the Forest Conservation Act came about in India in 1980 more than 317 cases of diversions of forests for mines have been seen till 1997. From 1998 to 2005, more than 881 mining projects led to diversion of forestlands over thousands of hectares. More than one lakh hectares of forest has been diverted for non-forest uses in the three mineral rich states of Orissa, Jharkhand and Chhattisgarh alone. This is almost 11 percent of the total forest area diverted in the entire country since 1980. Most of this is for mining and related industrial and development purposes. Exploitation of the natural resources for the industry is only one dimension of the environmental degradation problem the other, more stark, visually and in terms of its impacts, is the problem of the irreversible damage to the air and water as a result of pollution by mining activities that makes lives of those in and around mining areas impossible.

Livelihoods lost versus employment gained The loss of forest lands translates directly to losses in livelihoods, especially of adivasi communities, who depend on the forest regions for their day to day survival. The POSCO case has illustrated that amply. The statistics indicate that between 1950 and 1995 alone almost 25 lakh people have been displaced by mining activities in India. This may not include those displaced by factories and plants to process the ores. Further, it is after 1995 that the scale of mining and mine based projects has intensified and hence the figure though not available would probably be much larger for this period. Additionally of the 25 lakh displaced persons more than 50 percent have been adivasis of whom not even one fourth have been resettled (Fernandes.W et al, 1997). This displacement is justified with two logics one, that the industry will create more employment and two, for the indigenous communities this would provide an opportunity to integrate with the mainstream. Unfortunately both the arguments have provably failed. Statistics show a decline in the number of persons employed with mining industries by 30 percent in the period between 1991 and 2004 when the sector is growing at a 10 percent rate. Even on the manufacturing side a global trend in the steel industry is reductions in the workforce of the producers with the emergence of new steel-making technologies. POSCO in South Korea employs 10,000 people to produce 28 million tonnes of steel. Apparently, the thumb rule that can be applied to the direct employment potential of the steel industry is 1,000 per million tonnes. The volatility in the global steel market makes the employment scene even more unreliable. The recent economic crisis and financial melt down has seriously affected the demand for steel and big producers are cutting down production by 15 to 20 percent leading to large retrenchments. Besides, these arguments are more for the direct employment in India most of the labour being employed is contract and casual labour and hence the job-guarantees are anyway absent. The New National Mineral Policy of 2008, makes a strong push for more mechanised, less labour-intensive mining, where the industry will largely depend on skilled labour with a high level of technical competence. As far as the mainstreaming of the indigenous populations argument in concerned, it holds almost little validity in a country which has had a long history of tribal exploitation. The fact that uprisings and popular movements in the mining belt have seen an upsurge in the last few years is a comment on what the communities feel about the expropriation of their resources in the name of their development. Revenue and fiscal loss The other major attraction for the private and foreign investors apart from cheap labour is the favourable fiscal regime. By keeping the royalty rates and taxes on mining and related industries low compared to other countries, India has tried to be a favoured destination for investment. For instance, the iron ore royalty in India is a measly Rs. 27/tonne for good grade iron ore and as low as Rs.8 for low grades. The global rate of iron ore in 2008 was as high as Rs. 1500/tonne. Even the tax and excise duties for these companies are 44 percent lower than China and Latin America, the other mineral producing states. If one looks at the contribution of mining to the Gross Domestic Product in leading mineral producing states like Orissa, it is around 6 to 6.6 percent. In comparison that of agriculture is close to 33 percent. Despite this it is the mining sector that is on the States priority list and all attempts at increasing the tax rates for miners are being resisted by the strong mining lobby. Apart from states providing exemptions from certain taxes and subsidised electricity and water, the new Special Economic Zone (SEZ) Policy and legislation at the central level provides additional tax holidays. More than the tax holidays the provisions of the SEZ policy provide flexibility in environment and labour laws. Projects like POSCO may not have made much headway in land acquisition because of local protests but have managed to get the approval of the Ministry of Commerce (MoC) for Special Economic Zone status. The central government is predicted to lose Rs89,000 crores and the state of Orissa an additional Rs 22000 crores in revenue over the next 30 years as a result of the SEZ tax sops to POSCO alone. It is not just POSCO getting SEZ status that has raised eyebrows, the SEZ Policy has itself been in the line of fire on several fronts the most crucial being that of grabbing of prime agricultural land for the purpose of real estate projects at great losses to the land losers as well as the states exchequer.

Deregulation and devolution At the Indian Steel Conclave organised by FICCI in 2008, the Union Minister of Steel said that there are many problems being faced by the Steel industry in India because of its highly capital intensive nature. Many of the Greenfield projects are behind schedule by 2 years as a result. Land Acquisition and forest clearances are the two major bottlenecks being faced by most of the greenfield steel projects. There is also the issue of delay in iron ore mining lease to major steel producers, he said. This statement provides an insight into how the government views social and environmental regulations as bottlenecks and has over the past decade made all initiatives to dilute the already weak environmental and social justice related governance mechanisms to facilitate the growth of the mining industry. Common sense would suggest that a rapidly growing sector would require strengthening of protective mechanisms for the people and their environment. Unfortunately, the case in India has been the opposite. The Anwar-ul-Huda committee set up by the Planning Commission last year made recommendations for the New National Mineral Policy, which have been severely criticised. Some of the problematic recommendations of the Committee include: Increasing the duration of mining licenses and increasing the area limit for prospecting from 25 to 50sq.km and for reconnaissance permits to 500sq.km. Making grants for mining licenses, prospecting licenses and reconnaissance permits seamless to ensure security of tenure for mine owners. Vesting state governments with the power to grant forest clearances, which are presently given by the Ministry of Environment and Forests (MoEF). Challenging the role of the MoEF by saying that once an in-principle forest clearance is granted for a mine, the application need not go back to the MoEF for final clearance Urging state governments to act as pressure points for securing clearances from various departments Permitting matters (for license and lease by mine owners) to be taken to the central government if state governments do not respond in a stipulated time period Not requiring fresh proposals for renewal mining leases. The line being taken is of further decentralisation and deregulation of all regulatory mechanisms and regimes to ensure easy and speedy clearance of mining projects in complete absence of accountability mechanisms. The new Policy is likely to be followed with a series of amendments in the MMDR Act 1957, the only piece of legislation governing mining companies in India. The new Policy clearly aims at providing a ground where these violations can appear legal and permissible with support of the state and central government. Similarly the state governments are coming up with their own policies for ensuring deregulation. The government of Orissa notified its new Industrial Policy in March 2007. In order to attract investors, the Policy created a framework of governance structures at the district and state level with the sole purpose of speedy and easy establishment of industrial projects. Prevailing lawlessness Neither the judiciary nor any organs of the State have been able to ensure the implementation of the most critical legislations like the Panchayat Extension to Scheduled Areas (PESA) Act 1996 and the Samata judgment, both of which protect the interests of adivasi communities. While PESA makes essential the consent of the Gram Sabha of the village to be affected by a project in Schedule V (adivasi dominated) areas; the Samata ruling, in the context of mining, held that any transfer of land (immovable property) from an adivasi to a non-adivasi person was null and void.

The archaic and draconian Land Acquisition Act 1894 continues to acquire private lands forcibly in the name of public purpose even for private mining activities. In the absence of any positive amendment to the Land Acquisition legislation and introduction of a Central law on rehabilitation there is virtually no protection for those who lose their lands and livelihoods. The recently passed Forest Rights Act 2006 may come to the rescue of forest dwelling communities affected by expropriation of land and forest resources but the implementation of the Act has been slow and ridden with problems. Infact, the only legal and functional mechanism by which public opinion is sought on industrial and mining projects is the Environment Clearance Public Hearing, which has been reduced to a stage managed charade by the main protagonists - company henchmen and corrupt officials of the local administration and the Pollution Control Board. Experiences of public hearings of mining related projects across the country have shown how each time the "public" has been kept out of the hearing violating critical provisions of the Environment Impact Assessment Notification, which itself is facing threat of further dilution under pressure from industrial lobby and the Prime Ministers Office. Despite the efforts of the government officials and project proponents to scuttle the hearing process, communities across the country have used the forum to express their sentiments related to the project. But even in the few cases where public opinion has been reflected in the reports of the hearing, when the project comes up at the Ministry of Environment level for clearance, the same is granted despite the clear environmental and social implications of the project. Violence and corruption According to Rich Lands, Poor People: Is 'Sustainable' Mining Possible? (State of India's Environment: 6th Citizens' Report) published by the Centre for Science and Environment in 2007, all the mineral rich districts of the state of Orissa are in the list of the 150 most backward districts of the country. This is telling of the state of development in relation to mining. A comparison of mineral production and per capita domestic product figures demonstrates that there exists an inverse relation between mining and economic growth. This trend is amply evident in the three mineral-rich states of Orissa, Chhattisgarh and Jharkhand. The report further goes on to point out that most of the mineral-rich regions are also affected by the Naxalite movement. What could be better evidence of the unrest than the recent Salwa Judum campaign in the tribal state of Chhattisgarh. A civil war of sorts raged in Bastar region of the state in the past three years. With assistance from the ruling BJP as well as the Congress Party in opposition, the local administration has pitted the adivasi population of the area against the naxals in what they have termed as a peace campaign called Salwa Judum. The resulting conflict situation has led to displacement of more than 80,000 people from their homes into refugee camps or migration to neighbouring states. "The aim of this war is not just to exterminate Maoists, but also to implement industrialisation plans that have faced sustained opposition from tribal society" claims journalist Alok Putul, drawing linkages between the pushing through of the Essar and Tata steel projects in the face of local opposition and the unleashing of conflict and chaos within adivasi communities via Salwa Judum. ('No Man's Land', Caterpillar and the Mahua Flower, 2007)
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Analyse the Case using PESTEL(Political. Economic, Social, Technological, Environmental and Legal) Framework II. Prepare the following Discussion Questions Q1. What are the socio-economic and environmental costs of proposed POSCO Projects? Q2. Evaluate the sustainability aspects of the POSCO project. Q3. Whom do you feel responsible for the present state of affairs of the said project and what strategy you would have adopted for the Pohang Steel.?