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A Graveyard Of Dreams

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Four days in and around Bhubaneswar were enough to catch a glimpse of the ongoing war between the state government and a determined green brigade. On 25 June, the Orissa High Court stayed work on a 1,050 MW thermal power plant of the Hyderabad-based KVK Nilachal Power, which had been accorded clearances to operate within the prohibited 10-km zone around a wildlife sanctuary. The company’s defence was that the Kapilesh elephant sanctuary, in Cuttack district, had not been notified when permission was given. But the high court reasoned that the state government was aware of the proposed sanctuary and should have taken it into account while doing its due diligence. The matter has been referred to the Union Ministry of Environment and Forests (MoEF) for its response.

On 27 June, screaming headlines in Bhubaneswar’s newspapers announced that displaced families from eight villages in Sunabeda, in Koraput district, had forcibly occupied several acres under the possession of Hindustan Aeronautics (HAL), and had begun tilling and sowing. While HAL insisted the land was legally acquired by the state government and handed over, the farmers claimed they had been displaced without proper compensation.

This is but a snapshot of the excruciating logjam Orissa faces. In 2000, Orissa, a state rich in minerals such as bauxite, coal and iron ore, and with a long coastline offering possibilities of port operations, kicked off a flurry of MoUs, with several companies keen to tap the resources. Soon, the who’s who of heavy industry were flocking to the state — South Korea’s Posco, Tata Steel, Vedanta Aluminium, Jindal Steel and Power (JSPL), Sahara Power, to name a few. A decade later, some projects have gone on stream; but most big ones are stuck over land acquisition, raw material linkages or environmental concerns. Are these just teething troubles, or is Orissa now a graveyard of industrial intentions?

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MoUs And After
Orissa, a state with 85 per cent of its population in rural areas and with Scheduled Tribe and Scheduled Caste groups contributing 38 per cent of its numbers, has always looked to industrialisation as the route to high growth. Biju Patnaik, the father of modern Orissa and a chief minister many times over, sought to set up the private sector, Rs 300-crore Brahmni Valley Steel Project with French collaboration way back in the 1950s. But Nehruvian socialism would have nothing of it. He also shepherded Posco through Paradip in the early 1990s, but the Korean steel giant felt it was too early to make a foray.

“Biju Patnaik sought the good things in life, including a modern Orissa. He owned a bungalow in Mumbai’s posh Malabar Hills and in Lutyens’ Delhi. But he also had the vision to build Orissa’s first 100-km expressway to Paradip port in the 1960s to link the rich iron ore blocks to the port city. It also served as a highland rescue point for locals during frequent floods,” recounted Lalitmohan Pattajoshi, a senior Bhubaneswar-based writer.

The real push came in the new millennium. Industries were looking to expand and needed raw material. Orissa offered the opportunity with 27 per cent of India’s coal reserves, 33 per cent of its iron ore, 55 per cent of its bauxite and over 90 per cent of its nickel and chromite reserves. The state rolled out the red carpet.

In 2000 — the year Naveen Patnaik, Biju Patnaik’s son, and founder of the Biju Janata Dal, became the state’s chief minister — as many as 50 MoUs were signed with those seeking mining linkages. In 2002, Orissa began acquiring 12,000 acres for a steel city, Kalinganagar, in Jajpur district. Central to this was Orissa’s dream of a second mega steel plant after Rourkela — a 6 million tonne per annum (MTPA) facility to be built by Tata Steel. Soon after came the Posco MoU, in 2005, for a 12-MTPA plant at Paradip with a dedicated jetty and an investment of Rs 54,000 crore.

The state’s chief minister Narendra Modi may be damned for his ‘communal’ past but there is no denying that he has made Gujarat tick. Investors and industry see the state as the epitome of quick clearances and hassle-free operations. The shifting of Tata Motors’ Nano plant to Sanand from Singur, in West Bengal, was a boost; and the icing on the cake was the recent announcement by Osamu Suzuki that the future of the Japanese auto giant would be in Gujarat.

In the showpiece biannual business meets, branded ‘Vibrant Gujarat’, Modi has garnered a record investment commitment of Rs 39.6 lakh crore. The latest initiative has been a textile policy that promises concessions to those who want to set up spinning and weaving units in industrial parks around the state’s cotton-growing regions. With Gujarat growing 35 per cent of the country’s cotton but exporting 90 per cent as raw material, Modi hopes the value-addition will save farmers Rs 14,000 crore. In urban infrastructure, too, cities like Ahmedabad and Surat are being renewed. Success can be measured by the fact that Ahmedabad has been voted ‘the most livable city’ in recent surveys.

But the Gujarat success story is not in industrial growth and urban renewal alone. Farm income increased from Rs 14,700 crore in 2001 to Rs 96,000 crore in 2011, growing 11 per cent every year. Milk production ballooned 68 per cent; cotton output went from 2.3 million bales in 2000-01 to 10.5 million bales in 2010-11.

To attract investments to the state, Orissa passed the Industrial Facilitation Act creating the Industrial Promotion & Investment Corporation of Orissa (IPICOL) as a single-window clearing point for new industries. “In eight years, we have signed up Rs 16 lakh crore of investment in the state, of which Rs 2 lakh crore has come in so far,” says IPICOL’s CMD, C.J. Venugopal. To provide land and infrastructure, the Orissa Industrial Infrastructure Development Corporation (IDCO) was set up and headed by IAS officer Priyabrata Patnaik, who had the unenviable task of acquiring and handing over a whopping 150,000 acres of land.

And herein lay the snarl. After eight years, the state’s acquisition plan is in tatters. Just 36,000 acres, signed up and paid for, have been acquired. Even less has been actually handed over. Police firings and local resistance have given the Naveen Patnaik government a demonic reputation; and many, like ArcelorMittal, have packed their bags and are on their way out.


The Resistance
Most projects falling foul in Orissa have met resistance while acquiring or taking possession of  land. On 2 January 2006, police opened fire near Chandia village at Kalinganagar killing 14 protesting tribals. The road blockades and resentment that followed virtually halted the Tata Steel project for over four years. The flashpoint was the acquisition of 3,400 acres for Tata Steel. Ravi Jharika, secretary of the Visthapan Virodhi Jan Manch, said the resistance was the result of earlier acquisition drives in Kalinganagar. “When land was acquired for Nilachal Steel in 1995, our people were cruelly removed and dumped in open plots with polythene sheets to survive the elements. This is what hardened the resistance,” says Jharika.

NEW HOME: Gujarat was quick to offer land in Sanand when Tata Motors’ Nano plant ran into trouble in West Bengal (Pic By Mayur Bhatt)

The Posco script is on the same lines. Ever since the MoU was signed between the Orissa government and the company on 22 June 2005, there have been waves of ground battles that have reverberated far beyond Orissa’s borders. Initial resistance and skirmishes in November 2007 at Balitutha village, in the acquisition area, transformed into a full-scale police blockade aimed at isolating and driving leaders of Posco Pratirodh Sangram Samiti (PPSS) underground. The tables were turned when, on 1 April 2008, crowds swarmed the police barricades and drove the uniformed men out from schools and panchayat offices that they had occupied.


Interestingly, it is not the poverty, but the prosperity of the local farmers that has generated the resistance. Apart from a rich crop of paddy and fish, the local villagers own some of the most lucrative betel-growing vineyards in the country that thrive on the area’s sandy soil and fresh water. Seated in a sparse, thatched hut on a sand dune that serves as his office in Govindpur village, Abhay Sahu, president of PPSS, offers his rationale for the unbending resistance: “An average family earns over Rs 15,000 a month from betel-leaf cultivation alone; and they are self-sufficient in food. Why should they give up a good life for Posco’s jobs?”

Sahu has been leading the local farmers since 2005 and has spent 18 months behind bars for his efforts. But the government has changed its tactics. The local officials have slowly broken the resistance in some of the poorer villages such as Polang, Bhuiyapal, Nuhasahi and Nuagaon. Many of those who have exited are migrant Bengali fishermen. Having acquired around 2,100 acres of the initial target of 4,004 acres, the government is scaling down Posco’s plant size to 8 MTPA and acquisition target to 2,700 acres. The battle has thus narrowed down to the two villages of Dhinkiya and Govindpur, and the strategy is to exclude those tracts of land where the resistance is most fierce.

HUNGRY FOR ORE:  Vedanta Aluminium does not have environmental clearance to mine bauxite for its alumina refinery at Lanjigarh (BW Archive)

Besides ground resistance, several projects have also hit the environment wall. The best known is the Anil Agarwal-promoted Vedanta Aluminium (VAL) whose $1.7-billion operations in Orissa were questioned by Congress’s Rahul Gandhi. VAL currently operates a 1-MTPA alumina refinery and a 75 MW captive power plant at Lanjigarh, and has plans to hike the refinery’s capacity to 5 MTPA. Key to this expansion is bauxite from the Niyamgiri hills. But environmental groups representing the local Dongriya Kondha tribals have stoutly opposed mining in the hills, which they consider their spiritual property. Rahul Gandhi’s campaign in favour of the tribals climaxed when, in August 2010, the MoEF withdrew the clearances it had given to Agarwal. But with Orissa failing to provide bauxite from any other source, VAL has now given notice to the state government that it will stop operations at the Lanjigarh alumina smelter effective 5 December.

Tamil Nadu, the second most industrialised state after Maharashtra, is banking on its plentiful mineral resources and power. In the mineral-rich north, the towns of Salem and Mettur have emerged as important heavy industry centres with SAIL, Tata Refractories, JSW Steel and aluminium units. Chennai, over the years, has emerged as one of the top 10 global automobile and auto ancillary centres. Over the next decade, the region would have an installed capacity to produce 1.3 million cars and about 360,000 commercial vehicles a year. In recent years, the state has made considerable strides in setting up renewable energy capacity, particularly wind farms, which generated half of India’s 14,000 MW of wind energy last year and 20 per cent of Tamil Nadu’s power requirement.

Inheriting strong infrastructure and a healthy investment flow, Chief Minister Jayalalithaa has announced Vision 2023 to bring the state into the top 3 investment destinations in Asia. Targeting Rs 15 lakh crore in investments over the next 11 years, the state is focusing on developing areas such as power (Rs 4.5 lakh crore), transport (Rs 3.7 lakh crore) and urban infrastructure (Rs 2.75 lakh crore). The chief minister expects this to increase Tamil Nadu’s GDP by 11 per cent, taking the state’s per capita income to Rs 4.5 lakh.

The four focus areas will be automobiles and auto ancillaries, biotechnology, aerospace and renewable energy.

Not just this, Agarwal’s bid to set up a world class university at Puri has also come a cropper. Naveen Patnaik and Vedanta Resources signed an MoU in London in 2006 to set up what would have been the largest international institution of its type — 6,700 acres and billed to accommodate 100,000 students. But, by May 2010, the MoEF reversed earlier clearances and stopped work on the site charging the Anil Agarwal Foundation with environmental violations. The allotted land adjoins the Balukhand reserve forest and wildlife sanctuary. The last nail in the coffin came when the high court quashed the land acquisition and directed the state to return the 6,700 acres to the original owners.

Mining giant Rio Tinto — which has committed $2 billion in investments to develop three iron ore blocks in Keonjhar district along with partners Orissa Mining Company and National Mining Development Corporation — is still far from beginning commercial exploitation, though the MoU was signed as far back as 1995. Rio Tinto’s managing director, Nik Senapati, told BW: “It is a slow process, but we are hopeful of getting the permissions. A task force headed by the chief secretary is examining the issues.”

Bihar, at the turn of the century, was seen as a nightmare. Lawlessness and poor infrastructure kept investors away. When Nitish Kumar took over as chief minister in 2005, there was rightful skepticism. But in 3-4 years, he proved the skeptics wrong. His strategy has been to rebuild infrastructure, restore law and order, and offer investors a gateway to the markets of the East. 

Kumar inherited the handicap of having lost the mineral-rich areas with industrial centres such as Ranchi and Dhanbad to Jharkhand. But Bihar moved on to build new centres such as Darbhanga by attracting units, especially agro-industries, to tap its resources and the 104 million-strong market. Ruchi Soya is setting up a Rs 200-crore unit at Kaimur, while Britannia and Godrej Agrovet are homing in on Hajipur.

In the past couple of years, Kumar has signed 176 MoUs. To speed up land acquisition, the government has allowed industrial units to buy land directly from farmers at market rates. Conversion to industrial use is allowed for a small fee. The results have been impressive. The state’s GDP has grown at 10.9 per cent between 2005-6 and 2009-10, from 3.5 per cent in the earlier decade. The share of manufacturing has risen from 10.7 to 19.9 per cent; and, as a measure of the decline of its feudal economy, agriculture’s contribution has fallen 21 per cent in 2009-10 from 39 per cent at the beginning of the decade.

However, other promoters such as Lakshmi Mittal are disillusioned. ArcelorMittal had signed an MoU in 2006 to set up a 12-MTPA steel plant in Keonjhar district with a mega investment of Rs 50,000 crore. By the end of 2011, little progress had been made in acquiring the 7,500 acres the company had been promised. ArcelorMittal has made no move to renew the MoU, which expired last December.


Sahara India Power Corp’s Rs 8,000-crore, 1,320 MW power project to be built at Ghantabahal, in Orissa’s Bolangir district, has also had to virtually wind up with the state unable to hand over the required 960 acres. Opposition by farmers alleging violation of the government’s relief and rehabilitation programme, and the high court’s stay orders against acquisition have ensured that there has been no progress since the MoU was signed in 2009.

Justifying the resistance, Madhumita Roy, spokesperson for the NGO ActionAid, told BW: “Industrial growth has not benefited the poor in 60 years. Rourkela has been around for 50 years, but have the tribals got jobs? Keonjhar and Sundergarh districts have the largest industrial investments in the state, but they also have the worst poverty.”


Unveiling A ‘Soft’ Policy
The Orissa government’s answer to this criticism is IDCO CMD Pradeep Kumar Jena. He is an important man for industries trying to establish themselves in the state. On Jena’s table are a string of neatly laid out business cards of worried investors. Champak Alloys, Vedanta Aluminium, Adani Power. Someone representing Narayan Aluminum is pleading with Jena that he cannot take possession of the allotted land as it has been recently encroached upon. Jena picks up the phone and barks at his subordinate: “I give you one week. Remove the encroachment, or else you will be suspended. Take your pick.”

Turning his attention to the waiting media persons, Jena defines the new policy. “The chief minister has said: Industries are welcome, but there will be no use of force. Our R&R policy is: People first, industries and profit later. There will be no forced acquisition under any condition.” He conceded that Posco’s project size was being lowered to 8 MTPA and the acquisition target to 2,700 acres to avoid trouble spots.

Posco’s stand is at variance with this. “There will be no significant changes in the terms of the new MoU. The target for land acquisition will ultimately be 4,000 acres. Our starting point of the plant will be 8 MTPA but we will go for 12 MTPA,” Posco spokesperson K.H. Lee told BW, signaling a strategy of ‘creeping’ acquisition.
In the case of Posco, Jena also revealed that the government has dropped its bid to acquire the more difficult tracts of private land. Tata Steel at Kalinganagar, too, has followed the same policy of lowering its acquisition target and going on stream with just 3 MTPA in the first phase on 2,200 acres of the original target of 3,400 acres. Jena conceded that in the 2006-10 period, the government had botched up. “Force always rebounds. If we had been careful, things would have moved faster.”

Jena is the state government’s new ‘human’ face. Talking about the acquisition drive for 12,000 acres in Kalinganagar, he said: “ActionAid took busloads of local tribals to the Hirakud Dam across the Mahanadi in Sambalpur district to show what awaited them if they agreed to the rehabilitation package.”

Investors, too, are giving realistic responses, said Jena. “Industries realise that land acquisition is getting increasingly difficult and are willing to pay the price.” Though a Rehabilitation Advisory Committee (RAC) fixes the official compensation paid by industrial units, industries are paying many times more than the official rate. If the rate is fixed at Rs 1.5 lakh per acre, they pay an additional Rs 7-8 lakh an acre as part of the ‘informal’ package. In the case of Ind-Barath Energies, which signed an MoU in 2000 to set up a 1,360 MW coal-fired power plant in Jharsuguda district, Jena revealed that phase 1 has gone on stream with 700 MW after the company held bilateral talks with the local people and clinched a settlement without government intervention.

Ground Reality
The ‘soft’ policy seems to be working in the case of Tata Steel’s Kalinganagar unit as well. A drive on the muddy service road through the fenced-off complex showed hectic activity with the blast furnace, steel smelter, sinter plant and coke ovens coming up simultaneously. The chimney of the sinter plant has been hoisted as a flag to signal the company is on the move, trying to make up for lost time.


ANIL AGARWAL’S Vedanta Aluminium is unable to expand capacity from 1 to 5 MTPA as bauxite supply is blocked from the Niyamgiri hills (BW Pic By Umesh Goswami)

After a recent visit by Tata Sons’ deputy chairman Cyrus Mistry, the company has gone on record that the first phase of the plant will go on stream in the first half of 2014 with flat products. A company spokesperson (who also drove the BW team through the heavily policed site) said though the company had lost over four years, it was determined to make up for lost time and even double the plant size to 12 MTPA.

Situated a few kilometres away is the Gopaighatti resettlement camp where displaced locals have been given homesteads. Besides those ousted from the Tata Steel site, there are others from the Nilachal Steel and Jindal Power projects as well. The colony has a depressing feel, and bad roads. The poorly constructed houses hide the forced transformation under a coat of surreal yellow and pink paint.

On the other side of the complex, beyond the chain-link fence, is land belonging to Chandia village. It is officially ‘acquired’ on paper by the company, but is still under the control of resisting locals. Jharika, who has led the anti-Tata Steel struggle since 2005, does not think the land will be seized for some time considering he is building himself a pucca house with shiny vitrified tiles amidst cattle sheds and grain stores. He described the 2006-09 period as “the blockade”. “We could not venture out of our villages. For three years, many of us did not see even the main road. We, too, blockaded the company and the government officials from entering.”

The situation has changed now and Jharika is resigned to Tata Steel’s presence. He has no plans to lead another resistance, but is still stolidly opposed to displacement. An emotional shrillness enters his voice when talking of the future of his tribal kinsmen: “We have seen their package; it is jobs and some money. But our connection is to the land, the flowers and the grain we grow; and to our dead relatives who are buried here. We cannot get married without their blessings. If they push us off the land, our identity and culture will be crushed.”

The mood among the locals around the Posco site at Dhinkiya and Govindpur villages is more upbeat. For them, the steel plant still looks a long way off. The road to Dhinkiya veers off the super tarmac of the six-lane expressway 10 km before Paradip, at Bhutmundi. The 23-km drive from the expressway, past the villages of Balithutha, Nuagoan and Govindpur, is bumpy. As we near Dhinkiya, the track degenerates into a mud bund between backwaters and fish tanks. Dhinkiya, the anti-Posco nerve centre, is literally the end of the road.

PPSS’s Sahu walks us through a betel vineyard in Govindpur. We are asked to remove our shoes before we enter the matted bamboo enclosure that protects the glistening green betel vines. “That is because the Goddess Lakhmi (pronounced Lakh-mi and not Lakshmi) resides among the vines,” explains the proud owner, Kalaondi Jena. “They have to be tended like children. They need watering three times a week.” Women are not allowed in.

CHUNG JOON YANG,Posco’s global CEO, met various ministers, but his firm’s Rs 54,000-crore steel plant has now been scaled down to 8 MTPA (Bloomberg)

Sahu concedes the situation has changed substantially. “Yes, the government has stopped the use of force. Now they are using political means. They are splitting us along party lines, using the traditional divide-and-rule method. They cannot touch Dhinkiya, but they have split Govindpur,” he admits. He, however, promises it will be a bitter battle for the next 700 acres that the government wants to possess.

Is There A Way Out?
Posco has more than Sahu and the farmers of Dhinkiya to contend with. This March, a national green tribunal cancelled the environmental approvals that the steelmaker had got from the MoEF in January 2011 after years of lobbying and litigation. The environmental tribunal held that the piecemeal manner in which clearances had been accorded may have skirted the on-ground ecological situation. It has directed MoEF’s Expert Appraisal Committee to review the project. This means Posco will have to begin again.

Patnaik, Orissa’s additional chief secretary and former IDCO chief, said the South Korean steelmaker had the resilience to last; he expects Posco to start work by April 2013. “They have the advantage of superior technology and can ride out these problems. Their savings from producing power from the waste heat generated from coal and iron ore makes them 15 per cent cheaper than competing steel plants,” he said. 

On the other hand, environmental litigant Biswajit Mohanty, who has fought the Tatas to stop the Dhamra Port from uprooting the world’s largest nesting ground of the rare Olive Ridley turtles, says this round of environment clearances for Posco will consume another 2-3 years. “Where will they source water for the steel plant? Their attempts to tap the Mahanadi river resulted in villagers breaking their pipelines,” claims Mohanty.

Why are so many projects stuck? Is opposition to industrialisation endemic to states like Orissa and West Bengal? Writer Pattajoshi called it “the eastern mindset that is naturally suspicious of all development projects”. Or is it that some industrial projects botched up so bad that they have left a sour taste for generations to come? Posco, for instance, is not willing to discuss a change in alignment of the site to accommodate locals. “For the Koreans, when the Prime Minister of the country blesses a project, it means it is done! They had not taken the judiciary, the local resistance into account,” says Patnaik. Vedanta, too, has underestimated the sentiments that the tribes attach to the Niyamgiri hills.

A section of government officials in Bhubaneswar blames lack of political will. “The chief minister wants it to happen, but is doing little about it,” a senior bureaucrat told BW on condition of anonymity. More serious is the problem of ham-handed clearance of projects without sufficient impact assessment. One bureaucrat boasted that at one stage the Orissa government was signing an average of one MoU per week. Ironically, the same set of bureaucrats of the power and energy ministry, in a recent review, noted that only four of the 21 MoUs signed with Independent Power Projects (IPPs) had made substantial progress!

Significantly, despite all the drubbing, investors have not given up on Orissa. The state has emerged as the most-favoured destination for overseas investors, with investment proposals worth Rs 49,527 crore during 2011-12. This is ahead of No.2 and 3, Andhra Pradesh and Gujarat, according to the Associated Chambers of Commerce and Industry (Assocham).

Good news for the babus in Bhubaneswar, but how will they address the fear that equates development with displacement? Ranging from the experiences of Hirakud dam and the Rourkela steel plant in the 1950s, industry and development have come to mean agony and displacement for local farmers and tribal people. It is a cross of history that everyone from Naveen Patnaik down to the tehshildar is carrying in Orissa today. Unless the cross is buried, it will be difficult to get the state’s ambitious industrialisation programme back on track. 


(This story was published in Businessworld Issue Dated 17-09-2012)