POSCO not driven by philanthropy but shrewd planning to compensate displaced farmers
- An economic scam in the making -
Sandip K Dasverma and Dr Sanat Mohanty
- An economic scam in the making -
Sandip K Dasverma and Dr Sanat Mohanty
To read in Hindi language, click here
Note: Earlier, Dr Mohanty and Sandip had co-authored three in-depth special analytical articles on POSCO steel project in Orissa. To read them, click on the titles below:
Orissa: An Economic Scam Coming?
POSCO Project is not an unquestionable boon for Orissa
Who will gain from the POSCO Project in Orissa?
Rediff News recently reported that the steel giant POSCO, currently planning to set up a $12 Billion effort in Orissa has agreed to pay higher levels of compensation to farmers who will be displaced from non-forest land.
This decision of POSCO is not driven by kind-heartedness, a sense of justice for those displaced or magnanimity but from shrewd planning and analysis of what they can get away with. An earlier analysis published widely had shown that the people and the state of Orissa are giving iron ore away at less than 0.5% of the open market prices.
As part of the initial deal, POSCO has promised a flat rate of royalty at USD 0.5/ tonne of iron ore to the Government of Orissa (for ore with at least 62% iron content). This results in less than Rs 1620 crores to Government of Orissa over time of the contract of 600 Million Tonnes. The current global market rate of iron ore is over USD100/tonne. In December 2007, the market was at USD 120/tonne. By this rate, 600 million tonnes of iron ore (that POSCO would mine) at greater than 62% iron content would result in Rs 288,000 crores. Wow! We suddenly realize that POSCO has effectively been given this ore free. Since the Memorandum of understanding (MOU ) in 2005, the Iron Ore prices have gone up by 20%, 19% & 70% respectively.
The indirect costs of this effort to the people of Orissa add up even further. Thousands of acres of land and millions of gallons of water given almost free to the company, coal at give away prices and the economic venture framed within an Special Economic Zone (SEZ) providing tax benefits to the company -- all of these steal from revenue from the people of Orissa. And yet, the government of Orissa has continued to argue that this project is for the good of the state.
People who will be affected by the project, however, have realized the harm they come to and have continued to oppose this effort in spite of extreme intimidation, threats, offer of jobs or money.
For the last three years, POSCO, backed by the state government as well as the Centre, has made consistent, systematic, yet unsuccessful attempts to 'take over' this highly fertile and ecologically fragile coastal area for its projects. The company's persistence has led the state government to thwart widespread popular resistance to the project, and lately to step up pressure by using force. For the last four months, 18 battalions of police have been deployed around these villages, occupying government school buildings. The administration had also barred the entry of essential supplies into these villages and restricted free movement of people in the region. But the unrelenting resistance to the project in the face of coercion, cajoling and various other pressure tactics proves that the stakes are higher for the affected people. The promise of 13,000 jobs used to lure people has had few takers here. Communities are convinced that livelihoods lost will probably be many times those gained. It is a lesson they have learnt after 60 years of 'industrial development' in the state that has brought little benefit to them.
On April 1st, on the day POSCO planned a ground breaking ceremony, hundreds of people from villages in the area planned a huge rally despite the large police presence (and the police firings in Kashipur and Kalyanagar in the back of every one's mind). POSCO decided to cancel the ceremony (saying it was owing to the absence of government clearance coming through) -- the rally went on.
It is in the context of these two trends that the decision of POSCO to compensate displaced people must be understood. POSCO gains truly humongous amounts of profits from the deal -- hundreds of thousands of crores and the people of Orissa get little. As the economic analysis concludes -- the government of Orissa and the company seem to have colluded for there is no way that Government of Orissa does not realize how much it loses from the deal. The human rights and displacement costs are insignificant compared to the profits -- it is an economic scam in the making. A good hypothesis is that the issue of displacement is being used by the Government of Orissa and POSCO to keep focus away from the economic loot and that sooner or later the company will have a change of heart and compensate those who will be displaced. Even 1000 crores in displacement compensation will be insignificant for the company and the scale of profits it will make. Thus, as per this hypothesis, with profits being delayed owing to protests, the company will invest in compensations, earn kudos from all sections for doing the right thing and being a socially responsible company and then rake in hundreds of thousands of crores while their paid lackey -- the Government of Orissa and its officers -- prevent any prying eyes from uncovering the economic scam playing out.
There is little that anyone can do to stop this now -- anyone but the people of Orissa. Unfortunately, most of the media in Orissa or in India have attempted to frame the protests as being anti-development but have refused to discuss the economic analysis of this project. The Oriya educated sections have been happy to bask in the few crores that have come to Orissa as part of this venture. The only path left then in for the people of Orissa to raise awareness of the economic implications of this project, the economic loot that plays out, protesting the government and the project nonviolently, joining those who are directly affected by it empathetically. The only path left is that of people's democracy.
Sandip Dasverma and Dr Sanat Mohanty
Also read:
Orissa: An Economic Scam Coming?
POSCO Project is not an unquestionable boon for Orissa
Who will gain from the POSCO Project in Orissa?
News Blaze, US
The Seoul Times, South Korea
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