Resisting India's Great Iron Ore Heist

Published by MAC on 2011-06-20
Source: Open Magazine, NDTV Social

Villagers confront the country's biggest minerals project

The Great Iron Ore Heist

BY Jay Mazoomdaar

Open Magazine

18 June 2011

The Posco project in Odisha is not just about violation of human rights or an ecological disaster. It is a brazen example of how the country's high and mighty are shifting goalposts to favour a powerful foreign multinational corporation

 DHINKIA/NUAGAON, ODISHA - Under a scorching sun, children of Govindpur and Dhinkia villages in Odisha (formerly Orissa) lie on roasting sand in a semi-circle to block approach roads. A hundred metres behind them lie the women. These human rings are the first line of defence against the administration's acquisition of land for the Rs 52,000 crore * Posco project. On 2 May, Union Minister of Environment & Forests Jairam Ramesh reversed his nine-month-old order banning land acquisition, and on 18 May, revenue officials backed by policemen marched in.

After compensating those "willing to hand over land", the team ran into stout resistance. Unable to persuade defiant villagers, on 11 June, they sneaked in from the seaside. The daily bulletin proudly proclaimed that the government had taken over 24 betel vineyards. What went unreported: villagers put their vines back up the next day, and women and children returned to take turns under the sun in defence of their land.

It has been six years since the Odisha government signed its much-flaunted Memorandum of Understanding (MoU) with the South Korean steel giant for setting up a huge integrated power-cum-steel plant and captive port, allowing it to mine 600 million tonnes of iron ore in the state. On paper, the government has cleared the plan for the port and plant, but that means little on the ground.

As the battle of nerves intensified in Govindpur, villagers moved a PIL in the Orissa High Court (HC) on 20 May for a stay on the land acquisition (the next hearing is on 20 June). National Board for Wildlife member Biswajit Mohanty also moved the HC against the state for allotting ports to private parties through direct negotiation, without inviting public bids as mandated by the Centre; while the petition will be heard again on 21 June, an interim order on 30 May barred the state from signing any MoU for private ports without the court's permission-in effect, stalling Odisha's plan to ink a fresh MoU with Posco (the one signed in 2005 expired last year).

THE PLANNED LOOT

While India pats itself for having netted its single-largest foreign direct investment, Posco is poised to make many times its investment from iron ore alone. The 2005 MoU allowed the South Korean company to extract 600 million tonnes of iron ore over 30 years. Odisha's 2004 MoU with Tata Steel allowed extraction of just 250 million tonnes of ore for a 6 million tonnes-per-annum (6 MTPA) steel plant at Kalinganagar. Posco, with a proposed plant of twice that annual capacity (12 MTPA), has been allowed 100 million tonnes of extra ore.

Why does Posco need so much iron ore? Because Posco, as it made clear during its MoU discussions, plans to export 10 million tonnes of ore per year; the 2005 MoU allows it to ship out 30 per cent of the ore it extracts. In fact, the MoU also concedes that Posco may source an additional 400 million tonnes of iron ore from India for its steel plants in South Korea through supply arrangements from the open market. There is a fat margin between the domestic open market (average Rs 4,400/tonne) and the international price (average Rs 7,400/tonne) of iron ore. For 400 million tonnes, it adds up to Rs 1.20 lakh crore at today's prices.

Posco gets this deal at a delicate time, when the national consensus-of the Government, Judiciary and Indian industry-is moving towards limiting iron ore exports to help the domestic steel industry. India is the world's largest iron ore exporter after Australia and Brazil. But in terms of per capita reserves, India has only 21 tonnes against Brazil's 333 tonnes and Australia's 2,000 tonnes. Various studies have estimated that business-as-usual will exhaust India's iron ore reserves anytime between 2025 and 2040.

Karnataka banned iron ore exports in 2010, Chhattisgarh is considering the option, and Odisha Chief Minister Naveen Patnaik's own Steel and Mines Minister Raghunath Mohanty floated a similar proposal this January. Even Ramesh, while issuing the final clearance to Posco on 2 May, hoped that ‘the new MoU would be negotiated by the state government in such a way that exports of iron ore are completely avoided'.

Exports apart, the financial implications of subsidising 600 million tonnes of iron ore for a multinational are grave.

State governments earned a paltry royalty of Rs 27 per tonne till the Centre fixed it at 10 per cent of the domestic market price in 2009. But with global prices ruling as high as Rs 7,400/tonne, after accounting for royalty (about Rs 440/tonne) and operating costs (about Rs 750/tonne on mining, freight, etcetera), an extracting company enjoys a margin of around Rs 6,200/tonne on out-shipped ore. So, if Posco bought the allotted 600 million tonnes of ore in the international market, it would have to shell out an extra Rs 3.72 lakh crore at current prices.

That, at the very least, is India's gift to a South Korean steel-maker in competition with Indian companies. Ore is not getting any cheaper; its price has risen by over 500 per cent in the past 30 years.

All in all, it represents a generosity of scandalous proportions. Indian buyers, meanwhile, will have to pay global prices for steel from Posco's Odisha plant. Besides, in 2006, the Posco project got an in-principle approval as a Special Economic Zone (SEZ). This means tax sops that will result in the Centre and Odisha government forfeiting a bulk of the projected Rs 89,000 crore and Rs 22,500 crore, respectively, that they would otherwise have gained in revenues from the project.

Moreover, Posco's SEZ status (read: free export zone) and the captive port will make it very difficult for the authorities to keep a tab on how much ore Posco ships out from its exclusive facilities. Since the government levies no export duty in SEZs, it will also be much more profitable for Posco to export its steel produce from Odisha than to sell it in the domestic market.

Few emerging countries dump their national interest so casually. Posco tried the same deal in Brazil in 2004 when it inked a pact with Companhia Vale do Rio Doce (CVRD) for setting up a steel plant at the port city of Sao Luis and sourcing cheap ore from the Carajas mine. But CVRD not only insisted that Posco buy ore at the market rate, but also hiked the 2004 price of ore by 71 per cent in 2005.

So Posco shifted focus to Odisha.

THE DEVIOUS PLOY

Aware of India's strict green laws, Posco methodically broke down its mega plans into segments first, and then downplayed each component to obtain clearances. The company's controversial acquisition of 4,004 acres is only for the port and power-cum-steel plant. The project requires another 8,100 acres: 6,100 acres (mostly forest) for mining, and 2,000 acres for two townships (around the steel plant and the mine).

The proposal for the power-cum-steel plant itself is misleading. The application for environmental clearance mentions a 4 MTPA steel plant, not the 12 MPTA one scheduled to come up in six years. The environmental impact of the power plant was considered for only 400 MW installed capacity, not the entire 1,100 MW that would follow.

The primary need, though, is iron ore. Posco is yet to get permission to mine 6,100 acres of lush forest in Kandadhar Hills to extract those 600 million tonnes of ore. On 14 July 2010, the state HC cancelled the out-of-turn allotment of a mining permit to the South Korean firm. In October, the state government moved the apex court against the HC order, and the matter is sub judice.

The second key requirement is water. It is not clear if the approval for fresh water use of 10 million gallons daily (MGD)-slashed from the original approval for 16.5 MGD-is meant for the 4 MPTA production level or the full 12 MPTA level. In 2006, Posco got permission to draw 125 cusecs of water from the Jobra barrage. Following protests by the Mahanadi Banchao Andolan, backed by the BJP, the state asked Posco in September 2010 to draw water from the Hansua River instead. While the company has commissioned a fresh feasibility study, the issue remains unresolved.

Without any certainty on securing ore and water, Posco has frog-leaped itself to acquire land for its plant. The final component-a port to ship its output-was the first unit it got cleared; but again, not without doctoring facts. The captive port was proposed as a minor port to escape the stringent reviews that major ports attract. But the Posco port will construct two massive breakwaters, one 1,070-metres-long to the north and another 1,600-metres-long to the south, to control turbulence. There will be a 13-km-long approach channel, with a minimum width of 250 metres, to allow 170,000 DWT (deadweight tonnage) ships, among the biggest in the business.

Clearly, Posco's plot is larger than the sum of its parts. Getting started with the port and plant before obtaining rights to ore and water is an attempt to force a fait accompli, a phrase Ramesh himself uses liberally to describe the Navi Mumbai airport, Jaitapur nuclear plant and coal blocks across India.

Not that everyone was blind. In November 2007, the Supreme Court's (SC) Central Empowered Committee (CEC) in its report noted that ‘instead of piecemeal diversion of forest land for the project, it would be appropriate that the total forest land required for the project, including for mining, is assessed and a decision for diversion of forest land is taken for the entire forest land'. In fact, the SC's in-principle approval in August 2008 of the diversion of 3,093 acres of forest land for the Posco plant shared these concerns. But the Ministry of Environment & Forests (MoEF) was not listening.

THE TWISTED ‘PLANT'

Nandigram, Singur, Noida or Jaitapur, land acquisition for industrial use has been a highly sensitive issue in India. Posco's case in Odisha is even more complex. Since 3,097 hectares of the 4,004-acre proposed project area is classified as forest land, Posco required environmental clearance for land diversion.

However, there is no trace of wilderness in the Posco project area. What was ‘dense deciduous forest' in British records in the 1920s has disappeared since. Betel vines, arguably the country's finest, and paddy fields have taken over. But the Forest Rights Act (FRA) came into force in January 2008, empowering forest dwellers to determine the nature and extent of forest land use.

Community resistance, however, started snowballing soon after the Odisha government signed the controversial MoU in June 2005. By 2008, the project got a few in-principle green clearances. Then, Ramesh took over the MoEF in May 2009, and, within three months, ordered that no forest land be diverted for Posco without the consent of the affected gram sabhas.

In a volte face five months on, Ramesh granted the ‘final clearance' for land diversion on 29 December, in violation of his August order. Again, unable to defend the somersault, he had to issue a clarification in 10 days flat. On 8 January 2010, he wrote to the state that ‘final clearance' was ‘conditional', depending on the settlement of rights under the FRA.

What followed was surreal. Odisha claimed that there were no tribals or traditional forest dwellers in the project area. In the next few months, two Centre-appointed committees-under NC Saxena and Meena Gupta-nailed those lies. Following the first report, the MoEF stopped land acquisition in August 2010. Based on the second report-that called the state's claims ‘false' and‘fabricated'-the Ministry's Forest Advisory Committee (FAC) on 19 November 2010 recommended temporary withdrawal of the forest clearance.

But Ramesh offered yet another ‘conditional' final clearance on 31 January this year. The project was on if Odisha could give an ‘assurance' that there were no ‘eligible persons' under the FRA in the area. In its ‘assurance', the state government repeated all the claims earlier trashed as ‘false' by government inquiry panels. Then, on 29 April, it deemed the gram sabhas ‘illegal' and the resolutions ‘fake'.

On 2 May, keeping "faith... in what the state government says", Ramesh gave a ‘final approval' for land diversion.

THE PARTIAL ‘PUSH'

Ramesh's apparent leap of faith is not out of sync with the alarming alacrity shown by his predecessors in the green ministry in pushing the Posco project. But were they under pressure from their bosses and colleagues in the Government?

Consider the following:

In 2007, a file noting on 8 May shows that the Finance Ministry sought an update on the Posco project. The next day, a letter from the Director of Disinvestment wanted the status of the Posco proposal to be sent to the Finance Ministry by 18 May, as the then Finance Minister P Chidambaram was meeting members of the Investment Commission on 24 May.

Within days, a few hours before he relinquished the MoEF to take over the Telecom Ministry on 16 May, A Raja issued Posco's port its environment clearance, perhaps the last of the 2,016 green clearances he granted in just 36 months.

Again in 2007, a letter dated 4 June from the Finance Ministry sought the status of the Posco applications by 11 June, for a review meeting on the project's progress scheduled for 16 June. The MoEF Expert Appraisal Committee (EAC) cleared the plant at its meeting on 20 June.

#The Meena Gupta inquiry committee majority noted that ‘the proximity of dates between the letters from the Finance Ministry and the hasty processing of the approvals by the MoEF and EAC, despite the serious shortcomings and illegalities, is more than a mere coincidence' and ‘the brazen interference of the Ministry of Finance into [the] functioning of another Ministry is most unfortunate, highly improper and against public interest'.

# Meena Gupta took charge as MoEF secretary on 1 June 2007. Since Raja had already moved to telecom, the MoEF was effectively under the Prime Minister's Office. Posco had applied for port clearance in September 2006, and it took Raja eight months to okay it. The application for environmental clearance of the Posco plant was filed on 27 April 2007. Under the PMO, Gupta issued the clearance on 19 July, in less than three months. Again, when the Odisha government sought clearance for diverting 3,000 acres of forest land for the plant on 26 June 2007, Gupta promptly obtained an in-principle nod from the ministry's FAC on 9 August 2007.

# Could it be a coincidence that Ramesh handpicked the same Meena Gupta to head the four-member fact-finding committee in 2010? Unsurprisingly, Gupta was the lone dissenter in the panel and found nothing wrong with the clearance for land diversion that she had issued herself.

# Prime Minister Manmohan Singh, along with Odisha CM Naveen Patnaik, assured South Korean President Lee Myung-bak of the speedy clearance of Posco's project when the latter was in New Delhi as chief guest for the Republic Day parade last year. Minister of Steel Virbhadra Singh even offered a six-month deadline for the handover of land to the Posco delegation that accompanied the South Korean President.

Dr Singh repeated the assurance at the 17th Asean summit at Hanoi last October. At the G-20 summit at Seoul last November, India's Ambassador to South Korea SR Tayal said there was "a common desire on both sides to see the project through" and "every effort is being made by all stakeholders".

It is surprising how such personal commitments were issued on an issue to be decided on its legal merit. It seems the pressure on the MoEF to clear the project before the G-20 meet was enormous. After failing to meet the deadline, Ramesh blamed the FAC for delaying its report and assured the who's who in the country's power circles that "the decision will be taken within a couple of weeks".

Eventually, it took Ramesh a few months to mock the FAC and sundry committees of his own making to clear Posco with a lofty justification: "Beyond a point, the bona fides of a democratically elected state government cannot always be questioned by the Centre". But can the bona fides of a democratically elected gram panchayat be questioned any more than that of a state government?

For the villagers of Dhinkia, it may be too late for an answer.

* 1 crore = 10 million rupees; 100 rupees is approximately $1

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Orissa's corporate 'Meria'

By Sampad Mahapatra

NDTV Social

15 June 2011

Can a small minority of 4000-odd people hold the state and the country to ransom? Do they have any right to stand in the way of the biggest Foreign Direct Investment in India, the Rs 52,000 crore South Korean project that would generate huge amounts of revenue and employment and benefit millions of people?

Should the Orissa government not take the toughest measures against people who are resorting to cheap means of blackmail by using small little children as human shield? And in the process, embarrassing a government which is only trying to take control over the land itowns and for the larger public good.

Valid questions you would say. But travel to Dhinkia, 150 km from Bhubaneswar and your world view may just end up quite different.

On June 9, Govindpur, a small sea-side village hemmed in by sand dunes and hundreds of betel vine farms that dot the sandscape, was fighting both the state and the sun. And what I saw shocked me.

Over 300 school-going children in the age group of 5 to 15 were lying prostrate on the hot sand and shouting slogans. Behind them were rows and rows of women and elderly people sleeping on the sand and joining the chorus : Hataao Hataao Posco Hataao!

Barely 200 feet away, 500 riot-ready policemen were ready to break loose. The SP of the district was busy issuing warnings from a loudspeaker, asking people to disperse or face the music.

The sight was revolting. How could people allow their own children to suffer under the scorching sun, I wondered. Have they joined the barricade voluntarily or have they simply been used as human shield? What if they die of a heatstroke?

9-year-old Pushpa Mandal told me she was there because she had to. "Can we sit back at home when a ruthless government wants to grab our land and destroy the livelihood of our parents ? Do I have a future?'' she asked me without even expecting an answer. She knew she didn't.

Next to her was 12-year old Abhimanyu. He was in pain but that did not make him any less belligerent. "We have gone through hell in the last six years. Naveen Patnaik government has punished us enough. Why can't he ask Posco to look for another site? Steel can be produced anywhere but you need a special soil to grow betel. Why does he want to snatch away our land and reduce our parents and us to beggars?" I couldn't miss the tears welling up in his eyes.

Sabita Behera, a betelvine farmer herself who was there with two of her daughters boldly defended the decision taken by the Posco Pratirodh Sangram Samiti to include children in the human barricade.

"Why not?'' she asked. "After all it is they who are going to suffer the most. Will the company give them jobs ? No. But now even at this age, all of them earn one to two thousand rupees every month by simply counting and stacking the betel leaves."

But what about their education? "They all go to school but the schools are closed now for summer vacation. In any case even if they complete higher education, will they ever get a job ? But if the betel vine farms are there, they will earn their bread and lead a comfortable life."

Practical lessons that life teaches

My first visit to Dhinkia panchayat was on 23 June 2005, a day after Posco signed an MoU with Orissa government for its 12 million ton 12 billion dollar project. I was curious to see the place Posco had chosen as its project site. It was late afternoon by the time I reached Dhinkia.

I was struck by one common sight across Trilochanpur, Patana and Govindpur where every family was busy sorting betel leaves according to their size, counting and then stacking those in large baskets. Children, women and the elderly- in fact every person in this panchayat earns good amount of money out of this lucrative cash crop.

Over two third of the 2900 acre forest land that Posco wants for the project is in Dhinkia panchayat itself. And this large patch of sand is dotted with over 1000 betel-vine farms, several clusters of cashew plantations and hundreds of fruit bearing trees. Betel vines do not grow just anywhere. It requires a special kind of soil and environment that are available in this patch of land.

That explains why the local people are unwilling to part with even an inch of this ‘golden land' that has fed the local population for generations.

Interestingly although the local anti-Posco outfit is called 'Posco Pratirodh Sangram Samiti ' (PPSS), the people here do not have anything against Posco or any industry as such.

They say they are at war not with Posco but the state government which is behaving like an agent of the foreign company and trying to forcibly acquire land without initiating any process of dialogue.

"All that we are asking for is the re-location of the Posco project. Why should we allow our vibrant, self-sufficient and sustainable agrarian economy with a industrial project with uncertain and undefined benefits ?" asks Abhay Sahoo, chairan of the Posco Pratirodh Sangram Samiti. He says they are ready for the supreme sacrifice.

In 2003 people in Dhinkia had allowed a part of their village to be acquired by the Indian Oil Refinery through a unanimous 'Palli Sabha' resolution. They agreed to concede to the demand for land because it was a PSU and more importantly the land to be acquired was neither a source of recurring income nor of any great value to them.

But now that they are up in arms against land acquisition for such a mega project, how does the government deal with them?

Devdutt Singh, the Jagatsinghpur SP who was leading the police operations at the site said, "We are duty bound to acquire forest land owned by the government here but are being prevented from carrying out our job. This is unlawful, immoral and undemocratic and so we will do whatever is lawful."

A senior district official sitting next to him dismissed the human barricade as sheer blackmail and said they deserved to be beaten up black and blue. "The Union Ministry of Environment and Forest has already granted the full final clearance to the project. The state government is trying to acquire not any private land but 3600 acres of land that it 'owns'. So who are these people to stop us?"

"But what about the local community's right over the forest land?'' I asked him. The officer shot back. "That matter is over. They have no rights. We have made it clear there has been no violation of the Forest Rights Act and the Government of India has accepted it. Period.''

I am not quite convinced. Can any welfare state deny the local community their right to say no to the diversion of land that sustains them ? Remember, it's a whole community, not just a few individuals that depend on this forest patch for a livelihood. I do not think this needs to be fought out in court rooms. It is a moral question that any elected government worth its name needs to respond to.

The celebrated Forest Rights Act, trumpeted by the UPA as a landmark law, recognizes rights of the communities and individuals over forest land. If they are members of the Scheduled Tribes they can enjoy ownership rights over the forest land under their occupation any time before December 2005 . But when it comes to the Other Traditional Forest Dwellers, they need to prove they were dependent on the concerned patch of land for 75 years!

Why ? By what logic? And what is 'public good'? Who defines what is public good?

If we choose to deny the local communities any right over the forest land under this pretext or the other, we are making a mockery of our own laws and in a way subscribing to the logic that justified human sacrifice in ancient and medieval times, apparently for the larger public good.

Kondh tribals in Orissa used to sacrifice one member of their community each year to ensure a bumper 'turmeric' crop. The gory ritual that involved beheading of the person and sprinkling of his blood on the nascent turmeric crop was called the 'Meria'!

Would we be any less barbaric today if we believe the government is authorized to trample on people and their basic right to livelihood and dignity just because they refuse to fall in line or hail the $12 billion steel project, the biggest FDI in India as a manna from the Heaven that will ‘change the face of Orissa' and wipe out hunger , poverty and backwardness with its magical steel wand. If 4 crore people stand to benefit why can't 4000 people be gracious enough to give in? If they don't they can to go to hell.

As I walked back pondering over the 21st century 'corporate' version of Meria, I took a second look at the young Anna Hazares, far away from the media glare of Delhi. And I wondered if the Mahatma may have learnt a lesson or two from these young 'Ahimsa' soldiers.