Chapter 1 – Peddling POSCO: An Introduction

…the experience of this country is that governments do not stop doing something merely because it has been demonstrated to be bad. Or even contrary to constitutional directives and goals. They stop only if going along is made difficult to the point of near impossibility. No democratic dispensation should be thus, but Indian democracy is thus (K. Balagopal, human rights activist)

Paan kheti [betel vine cultivation] is our lifeline…why does the government want to destroy it and force us into being laborers…the government does not think about our life and dignity…only about the profit for their companies... (Niranjan, a 60-plus-year-old betel vine farmer)

1.1 Introduction

On June 22, 2005, the Biju Janata Dal (BJD) government of the state of Orissa in eastern India signed a memorandum of understanding (MoU) with the world’s fourth largest steel company – the South Korean multi-national corporation Pohang Iron and Steel Company (POSCO).1 The MoU was to build a steel plant with a capacity of 12 million tons per year, along with a captive port and iron ore mines. Estimated at $12 billion USD (Rs.52,000 crores)2 and touted to be India’s largest ever Foreign Direct Investment (FDI) since its economy liberalized in 1991, the project was claimed by the Orissa government to “bring prosperity and wellbeing to its people” by embarking on major industrialization based upon exploitation of its natural resources.3 More than five years later, and after the MoU expired in June 2010,4 the POSCO project is still awaiting legal clearance and has yet to acquire even a single acre of the 4004 acres needed for it (about three-quarters of which is currently designated as “forest land”).5

What happened over the last five years that prevented the Orissa government from moving ahead on the POSCO project? In pursuing the above question it became quickly obvious to us (the writers of this report) that the “voice” of the government was not the only one present in the context of the planned POSCO project. Nor was it resonating with the “voices” of the people in whose name the government was planning the project. Further, the story of development narrated by the government– about how such a mega-venture with huge private foreign investment would bring prosperity to all– was not the only one available for any listener and observer. There were other stories about development in circulation – stories of how people were already creatively involved in making their lives and livelihood in quiet dignity in precisely those places that were sought for the POSCO project, that the road to realizing the MoU would need to contravene some very enlightened laws put in place by the same Indian state, that there were reasonable grounds to question the tall claims for prosperity made by the state and its MoU, that the actual environmental impacts were far from benign, and many such others. There were, so to speak, many a gap between the warp and weft of the narrative of the MoU.

Even a cursory review of the mainstream media in India and abroad made it amply clear that as early as August 2005 several “people’s groups” made up of residents in the affected areas had formed around the POSCO issue. Some of these groups include the POSCO Pratirodh Sangram Samiti (PPSS, Anti-POSCO Mobilization Committee), the Nav Nirman Samiti (New Development Committee), Rashtriya Yuva Sangathan (National Youth Collective), United Action Committee (UAC), groups of a much older national movement, Sarvodaya, the Orissa Bachao Andolan (Save Orissa Campaign) and some smaller groups. Not all the groups listed above approach the issue in a similar manner; nor are their demands all the same. Many of them demanded attention to creating and sustaining a vibrant economy with guaranteed jobs for everyone, many clearly pointed to the current existence and importance of betel vine cultivation which sustains a large population in this area. Some raised the issue of their land ownership which was not being recognized by the state, and noted that the POSCO project itself was thus an “illegal encroachment” on their land. All of them reminded the public about the poor rehabilitation of previous development project oustees in Orissa, thus bringing up the question of implementation of promises by the state. While for some groups it was an issue of proper compensation for their land, for others it was about their rights to earn their own livelihood and not be displaced from their land, and for yet others, it was a more fundamental problem of the kind of development model pursued feverishly by the state which seemed very “anti-people.” Despite such a spectrum of thinking, all the above groups have come together from time to time on one platform to show opposition to the POSCO project as currently conceived.

One of the earliest actions of the PPSS was to block the entry of any government or POSCO official into three (Dhinkia, Gada Kujanga and Nuagaon) of the nine villages earmarked for the POSCO project, and instead demand that their government enter into discussions with them about their own future. This blockade continued through the ensuing years until May 2010. The major responses from the government of Orissa included the deployment of 12 platoons of paramilitary forces in the weeks leading up to the first public hearing scheduled in April 2007 which had the effect of creating what international observer groups called “atmosphere of intimidation” to the local populations from affected villages desirous of attending the hearing, and again in November 2007 when police, along with allegedly hired goons, attacked and critically injured protestors in Balitutha town near the village of Nuagaon, and most recently again in May 2010 when 40 divisions of the Orissa state police opened fire on a peaceful protest (again in Balitutha), reportedly injuring more than 200 people in the process. The May event was also noted by observers as one in which the state engaged in acts that grossly violated civil liberties such as arresting without charge, engaging in arson of local property, and publicly humiliating defenseless villagers. Such state responses are of course in addition to the far more frequent and far less dramatic ways in which the state has routinely harassed any citizen who dares to dissent with the POSCO Project.

The POSCO project entered the realm of legal battles when the Forest Rights Act (FRA) – a progressive act that recognizes the rights of people who have lived (and depended upon for their livelihood) for more than three generations (75 years) on “forest land” and empowers the gram sabha (“village people’s forum”) to protect and manage forests as a statutory authority – was passed by the Indian Parliament and became law on January 1, 2008. The FRA, combined with the fact that three gram sabhas in the steel plant area passed resolutions in April 2008 to not divert any forest land to the POSCO project, compelled the central government’s Ministry of Environment and Forests (MoEF) to act in accordance with the law in taking decisions on the POSCO MoU. It is this body, the MoEF that is still deliberating about what has now become the POSCO imbroglio.

It is in facing such stark contradictory narratives from the ground-up that it became imperative for the writers of this report (or for that matter any objective observer) to ask a different set of questions than is allowed by the prevailing orthodoxy of public discourse over development in India: Who are “the people” in whose name and for whose development the POSCO project has been so vigorously pushed by the government of Orissa? What are the impacts that the POSCO project will most likely have on “the people” in the districts of Jagatsinghpur, Keonjhar and Sundergerh, and the gram panchayats 6 of Gada Kujanga, Nuagaon and Dhinkia, where the steel plant, the port and the mines will be set up? How have “the people” already been affected by the POSCO project over the last five years and what are their demands from their own government? And finally, who will this so-called development benefit, and who will pay its costs (assuming only for the sake of argument that all costs can actually be measured)?

The epigrams to this introductory chapter are signposts that serve as reminders of the kinds of struggles that are demanded of those who attempt to navigate the rugged terrain of Indian “democracy” in an era of growing nexus between national governments, and national and multinational capital, and the responsibilities of concerned people anywhere in the world who are in solidarity with all movements for peace and justice with sustainable, equitable and just development. Thus, the final question that arose in the process of preparing this report was: What does it say about Indian “democracy” when the Indian State routinely embarks on development projects that promise prosperity to an undifferentiated mass called “the people” or “the public” while ensuring the sustained enrichment of an undisclosed number of private actors, national and international?

For, the POSCO saga7  is only the latest in a long line of deeply problematic and adventurous undertakings by private capital (aided in multiple ways by the Indian state) into the mineral-rich parts of India, especially the central and north-eastern mining belt in the states of Chhattisgarh, Orissa, West-Bengal, Jharkhand and Bihar. With approximately 50% of India’s known bauxite, 98%   of chromite, 25% of coal, 35% of iron ore, 27% of manganese and 91% of nickel ore,8 Orissa provides ample evidence for a troubling pattern  of development models that are built upon hubris and laced with violence. One does not have to go too far away from the proposed POSCO project to see this dramatically.

Close to where the POSCO drama is unfolding, the town of Kalinganagar in the district of Jajpur has witnessed a long-drawn battle since 2004 between local police and residents that has resulted in several deaths. At the center of this project is the giant Indian private company, Tata Steel, and the displacement and rehabilitation of residents (many of who are Adivasis or indigenous people of India) who stand in the way of its iron-ore mining and steel plants. By May 2010, however, despite the state categorically refusing “land for land” compensation, the foundation stone for the Tata plant was laid amidst much fanfare and the state claimed that the protests of “the people” were no longer needed since their demands for compensation were all met. Currently, more than 40 MoUs have been signed with various companies, and the government of Orissa intends to make this area the “steel hub” of the state. With stakes rising due to delays in acquisition of land, it is not surprising then that there have been various instances of local police firing upon protestors.

In another district in Orissa, this time the southwestern district of Rayagada, the people of Kashipur block have also experienced the weight of the Orissa government’s MoU with the giant materials and alumina company, Alcan (Canada) teaming up with Aditya Birla group’s Hindalco (India) to set up a plan for mining, and an alumina refinery under the new name Utkal Alumina International Limited. This project too is mired in conflicts over human rights and environmental violations. Finally, following a long-drawn fierce resistance by an Adivasi (indigenous) group in the bauxite-rich mountains of Niyamgiri in the Lanjigarh block of Kalahandi district in western Orissa, the MoEF, (based upon the submission of an independent committee headed by N.C. Saxena and the recommendation of the Forest Advisory Cmte.) – much against the wishes of the Orissa state government – recently made a landmark ruling denying the UK-based mining company Vedanta Resource Plc. any rights to mine the bauxite ore, citing systematic violations of specific environmental laws and the human impact of displaced Adivasis.

Can one now expect that the huge hoarding put up by Vedanta which greeted travelers at the Bhubaneshwar airport in Orissa, announcing “Mining Happiness” alongside the smiling faces of Adivasi children, will be changed?9 Perhaps it will be replaced by what one sees on the website of POSCO-India, “Building Better Tomorrow with Steel”10

Lest the reader assumes that the case of the state of Orissa, or that of the government of India- mired in confrontations with their own people over the issue of development – is exceptional, it is useful to see how Orissa is better viewed as a textbook case of the global phenomenon known as “neoliberal” globalization.11

It is now a well-known and widespread fact that “development” is a deeply contested notion, and more so in the context of a global age where the “rights of people” are as globally discoursed as are the “rights of capital”, and the role of national and state governments with regards to whose interests they prioritize. Thus, it is now commonplace for official governmental and transnational institutional meetings (such as those of the IMF and the WTO) that decide the fate of millions, to be held in closed spaces cordoned off by riot police whose task is to hold the same “people” at bay in whose names the decisions inside the meetings usually assume to operate. More subtly, but with equal efficacy, the state “shuts out” its own people, as when for example, the Orissa State Pollution Board made a mockery of the government of India’s Environmental Impact Assessment (EIA) mandate that required it to hold a public hearing “in a systematic, time bound and transparent manner ensuring widest public participation at the project site(s) or in its close proximity.” Instead, the Board chose to hold its first public meeting (in April 2007) to discuss the environmental impacts of the POSCO project in a high-school located at Kujanga which is 15-20 kilometers away from the affected area without any consideration that holding a public hearing so far away from the villages which would be affected would require loss of an entire day’s wages and earnings for any villager who wished to attend. Not surprisingly, a very large number of people affected by the POSCO project did not attend this public meeting held in their name.12 Surely one of the chief victims of such tunnel-visioned development is democracy, a label proudly worn by Indian state representatives when seeking foreign investment, and regularly invoked as a positive asset when used to calculate India’s credit-worthiness.

In this light, this report finds it very unfortunate that the case for POSCO, built up by the government of Orissa, and held onto almost dogmatically despite many reasons that demand major rethinking, was built almost entirely on a single report put out in 2007 by the National Council for Applied Economic Research (NCAER)13 As we will show in the following chapters, some of the key questions about “the people” seem to be either completely neglected, or brusquely and at times too simplistically explained away in the NCAER report. As the government of Orissa and the representatives of POSCO feverishly and enthusiastically referred to the NCAER findings, we find that their claims about the purported benefits of the project for “the people” have only become even more exaggerated. Were it not for the uncomfortable fact that development is such a deeply contested reality by people demanding real democracy, projects such as POSCO need not require much “selling” to its purported beneficiaries – “the people.”  In other words, if the POSCO MoU were indeed so obviously for the “public good,” would we need the state to be “peddling prosperity” in such a manner?

This report is written with an intention to not only give readers a comprehensive look at the stakes involved in the POSCO project, but to also invite readers (ordinary concerned people, civil and political society organizations, and expert committees expressly charged with good governance) to actively participate in “democratizing development” in India. For, only the full participation of informed and ethical citizens in what is essentially a political process (constituted by forms of power and authority to speak and act on behalf of “the people”) will make any development sustainable, equitable and just.

The report is comprised of three key chapters. Chapter 2 focuses on the role played by the government in facilitating the POSCO project. It examines in some detail how all three branches of government – administrative, legislative and judicial – have gone out of their way to promote and protect the POSCO project often breaching the very laws they are sworn to uphold, and in clear defiance of the expressed will of the affected people.  Chapter 3 systematically examines the major claims made by the state of purported benefits of the project to the local economy and local communities. It does this by first describing in some detail the existing local economy and kinds of livelihood available to the people, and then critically evaluating and assessing the proposed POSCO-centered economy for its potential for job-generation and livelihood possibilities. Chapter 4 shifts focus from the struggles over land to other equally important but far less visible struggles over availability of water for human consumption and irrigation, depletion of forest cover and its impacts in mining areas, and major environmental impacts on marine and wildlife, and changing riverine topography with the proposed new port.

1.2  Factual Contexts of the POSCO Project

1.2.1 Land Area Sought to be Acquired by POSCO:

  1. Proposed investment: USD $12 billion (Rs. 52,000 crores) over 30 years
  2. People estimated to be affected by the POSCO project
    1. Plant and Port
      1. Displacement: 22,000 people (approx. 4000 families)
      2. Project-affected (loss of livelihood): No official figures released. Estimated to be above 50,000 people including displaced
    2. Mines
      1. Displacement: No official figures exist as territorial scope is not fully identified. Estimates point to 12 villages in Keonjhar district. Similar estimate for Sundergerh district not available.
      2. Project-affected (loss of livelihood): No official figures available. Estimates of 32 total villages in Keonjhar district, 84 total villages in Sundergerh district. Total population affected: 10,000 -15,000.

1.2.2.   Current Status of POSCO Project

  • Steel plant and Port: No land acquired yet. Phase 1 of construction yet to begin. POSCO has opened project office in a town. MoEF investigating implementation of FRA. Special committee appointed by MoEF – Chaired by Ms.Meena Gupta – submitted reports on October 18, 2010. MoEF has referred report to Forest Advisory Committee. Active resistance since 2005 to the project.

  • Mines: Government of Orissa has authorized Khandadhar mines for POSCO. Two litigations against such authorization. Orissa high court has stayed government authorization. Legal battles moving to Supreme Court. Emerging resistance over last year.

  • SEZ-status: In-principle approval in 2006, renewed in 2007 and 2008. As SEZ status renewal is only allowed twice, POSCO forced to reapply for SEZ status. Form A (application for SEZ status) filed in January 2010.

  • Other infrastructure: Township, Railway and Road development – land not yet earmarked.

1.2.3 Timeline of POSCO in Orissa 14

June 22, 2005: MoU signed between Orissa government and POSCO-India, subsidiary of the POSCO Corporation of South Korea.

August / September 2005: POSCO Pratirodh Sangram Samiti formed to oppose project. A people’s blockade declared in three gram panchayat areas affected by plant. The blockade allows all persons entry and exit except government officials and POSCO employees.

December 18, 2006: Forest Rights Act passed by India Parliament. Act is applicable in both project plant/port and mining areas.

November 29, 2007: Police and hired goondas attack PPSS dharna (rally) at one entry point with bombs – more than 50 people injured – dharna tent demolished. The protesters are driven back into one gram panchayat (Dhinkia). Police set up camps in the schools of the other two villages, deploy in heavy force.

January 1, 2008: Forest Rights Act notified into force.

August 8, 2008: Supreme Court upholds “in principle” clearance for use of forest land but directs Environment Ministry to proceed “in accordance with law.” No final clearance granted. The case is only between Orissa government, Central government and POSCO; no opponents to the project are represented.

March 23, 2008: Gram sabha of Dhinkia passes resolution electing a Forest Rights Committee and starting process of inviting claims under the Forest Rights Act. The State government takes no steps to implement Act in the area. Claims are till this date with the gram sabha.

August 3, 2009: Following prolonged protest, Environment Ministry issues circular clearly stating that no application for “diversion” (i.e. clearance for non-forest use) can be made without inter alia certificates from gram sabhas of the affected area stating that:

  1. The process of implementation of the Forest Rights Act is complete and all rights have been recognised
  2. That they consent to the diversion after being informed of the nature and details of the project and rehabilitation project.

December 29, 2009: In violation of its own circular and the Forest Rights Act, Ministry grants final clearance for diversion of forest land.

January 5, 2010: POSCO Pratirodh Sangram Samiti writes to Ministry against illegal action.

January 8, 2010: Environment Ministry “clarifies” that clearance is subject to the August 3rd, 2009 circular.

February 1-7, 2010: In response to a request from the Collector for the opinion of the gram sabhas, all three in the steel plant area pass resolutions refusing consent for diversion of forest land and demanding recognition of their rights and power to protect forests. As per law, the forest clearance is now clearly illegal and has to be withdrawn.

February 2010: PPSS begins a three month dharna at main entry point at Balitutha.

May 2010: 25 platoons of police deployed in the area. Forces attack villagers. At least 50 people injured, market areas and protest camps burned.

June 2010: Negotiations between PPSS leadership and government of Orissa to allow government survey of land (without police presence) in exchange for chief minister Naveen Patnaik to visit 9 villages for meetings with residents. Survey process incomplete. Chief Minister Patnaik’s visit never materializes.

July 1-12, 2010: POSCO / Government of Orissa announces new compensation package. PPSS holds public rally and burns copies of new compensation package.

July / August 2010: MoEF appoints N.C.Saxena Committee to investigate implementation of FRA in plant/port area. Committee submits report indicating failure of Orissa government to implement FRA and cites government of Orissa for deliberate suppression of data and information sought by MoEF.

September / October 2010: MoEF and Ministry of Tribal Affairs appoint Meena Gupta Committee. Scope of new committee expanded to investigation of violation of all laws, government procedures and rules.

1.2.4. Maps of Proposed POSCO Project in Orissa

  1. POSCO was nurtured as a state-owned enterprise since 1968 for more than three decades by nationalized bank credit, public investment and well-designed protectionist policies (all hallmarks of the South Korean model of state-led development). It became a world-class steel producer in the late-1980s and remained so into the 1990s. Since 1997 there was a systematic privatization of POSCO largely due to the economic crisis affecting all Asian “Tiger” economies and increased foreign investment in POSCO. Only in 2000 when the South Korean state divested its shares from the company as part of its privatization policy did POSCO become a private corporation. As Cambridge economist Ha-Joon Chang has convincingly shown in his book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, recently privatized enterprises such as POSCO “try to underplay, if not exactly hide, the fact that [they] became a world-class firm under state ownership” (Chang 2008: 112; see also pp.12-14). This point is worth remembering when seeking to understand the POSCO saga in India today, where one frequently encounters a public discourse about privatization that is not much more than mythmaking. []
  2. 1 crore = 10 million. For a fact-sheet on what is the POSCO project in Orissa, see section 1.2 []
  3. Memorandum of Understanding between the Government of Orissa and M/s POSCO for establishment of an integrated steel plant at Paradeep []
  4. MoUs usually have a five-year term limit after which they need to be renewed. []
  5. The government of Orissa in 2005 and continuing until the present is headed by Mr. Naveen Patnaik of the Biju Janata Dal (BJD) party which was supported by the Bharatiya Janata Party (BJP) for 11 years until 2009 when they parted ways due to differences over seat-sharing. The MoU was signed under the aegis of Mr. Harichandran from the BJP who was then the Minister of Industries in the BJD government. Since 2004, the central government in India is formed by the Congress Party. []
  6. “local village councils”, or the lowest administrative level of decentralized governance in India []
  7. In this sense the term “saga” is appropriate – etymologically referencing the hotly contested stories of adventure, conflict and colonization of Iceland. []
  8. See list of mineral resources in Orissa []
  9. Field report by ex-DGP Dr. Subramanian []
  10. POSCO’s mission, as mentioned one its website []
  11. Jan Aart Scholte, The Sources of Neoliberal Globalization, 2005. UNRISD publication []
  12. An independent fact finding team reported thus: “On April 15 a public hearing for Environment Clearance was held for the steel plant and the captive port of the project. It has been widely reported in local newspapers, more than 20,000 people from the three affected gram panchayats boycotted the hearing organised at Kujanga dubbing it a “farce”. The fact that the Orissa Government deployed several platoons of armed paramilitary forces in the Jagatsinghpur District on April 9, five days before the hearing, also had an impact.” It may also be noted that the loud opposition voiced at the hearing by those people who did manage to attend was disregarded by the organizers. []
  13. Some accounts of the POSCO project mention a socio-economic report by the XIM, Bhubaneshwar. The report, to the best of our knowledge, is not published or distributed in public through either the XIM website, nor the website of the government of Orissa. Inquiries in the three gram panchayats reveal that some researchers from XIM had once approached the villages to do some work, but no significant survey or interviews had been conducted by this group. []
  14. Excerpted from the timeline by Campaign for Survival and Dignity []


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